Supreme Court quashes land acquisition for Vedanta University: Anil Agarwal Foundation loses appeal (2023)

Date of the Judgment: April 12, 2023
Citation: Not Available
Judges: M.R. Shah, J., Krishna Murari, J.
Can a private company, masquerading as a public entity, acquire vast tracts of agricultural land for a project that doesn’t yet exist? 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 statutory procedures and protecting the rights of marginalized communities. This judgment underscores the judiciary’s role in ensuring transparency and accountability in land acquisition processes. The Supreme Court bench comprised Justices M.R. Shah and Krishna Murari.

Case Background

The case revolves around the acquisition of approximately 6000 acres of land in Orissa, affecting around 6000 families and 30,000 people. The land was intended for the establishment of Vedanta University. The process began on June 23, 2006, when Mohit Kumar Rana of A.T. Kearney Limited submitted an application to the State Government of Orissa, stating that Vedanta Resources Limited planned to set up a university. The application requested 15,000 acres of land near Nuanai, Puri, with 1500 acres needed by September 2006. A Memorandum of Understanding (MoU) was signed between the Government of Orissa and Vedanta Foundation on July 19, 2006, with the government confirming the availability of 8000 acres of contiguous land. Initially, Sterlite Foundation, later renamed Vedanta Foundation, was a private limited company. It then changed its name to Anil Agarwal Foundation. The State Government initiated land acquisition proceedings, issuing notifications under Section 4(1) of the Land Acquisition Act, 1894, between December 13, 2006, and August 21, 2007, for 6917.63 acres. Declarations under Section 6 were issued for 5619.05 acres after considering objections under Section 5A. The possession of 3342 acres was taken over and a compensation of Rs. 41.96 crores was disbursed. However, the process was challenged by landowners and through Public Interest Litigation (PIL), citing irregularities and violations of the Land Acquisition Act, 1894.

Timeline

Course of Proceedings

The High Court of Orissa heard two writ petitions filed by the original landowners and one Public Interest Litigation (PIL) filed on behalf of small landholders. The High Court allowed the writ petitions and quashed the land acquisition proceedings, including notifications under Sections 4(1) and 6 of the Land Acquisition Act, 1894, and the awards passed. The court directed that the possession of the acquired lands be restored to the respective landowners, who were to refund the compensation received. The High Court also quashed the grant of government land to the beneficiary company, directing the State Government to resume the leased lands.

Legal Framework

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

• Section 4(1) of the Land Acquisition Act, 1894: “Publication of preliminary notification and powers of officers thereupon.” This section deals with the initial notification for land acquisition.
• Section 5A of the Land Acquisition Act, 1894: “Hearing of objections.” This section outlines the procedure for hearing objections to the acquisition.
• Section 6 of the Land Acquisition Act, 1894: “Declaration that land is required for a public purpose.” This section deals with the declaration of land acquisition.
• Section 39 of the Land Acquisition Act, 1894: “Previous consent of appropriate Government and execution of agreement necessary.” This section mandates prior consent for land acquisition for companies.
• Section 40 of the Land Acquisition Act, 1894: “Previous enquiry.” This section outlines the conditions for giving consent for land acquisition for companies.
• Section 41 of the Land Acquisition Act, 1894: “Agreement with Company.” This section mandates an agreement between the government and the company.
• Section 44B of the Land Acquisition Act, 1894: “Land not to be acquired under this Part except for certain purpose for private companies other than Government companies.” This section restricts land acquisition for private companies.
• Rule 3 of the Land Acquisition (Companies) Rules, 1963: Deals with the constitution of the Land Acquisition Committee.
• Rule 4 of the Land Acquisition (Companies) Rules, 1963: Specifies the matters to be considered before initiating acquisition proceedings.

The legal framework also includes the Companies Act, 1956, specifically concerning the definition of a public company and the process of converting a private company to a public one. The Supreme Court emphasized that the acquisition process must adhere to the constitutional principles of fairness and public interest.

Arguments

Appellants’ Arguments (Anil Agarwal Foundation):

• The appellants argued that the High Court erred in quashing the entire acquisition as only a few landowners objected under Section 5A of the Land Acquisition Act, 1894.
• They contended that the company was converted to a public limited company before the Section 4 notifications were issued, complying with the Act.
• They submitted that the land was identified by the State Government, not by the company, and that the State Government undertook the inquiry as envisaged under Rule 4 of the Land Acquisition (Companies) Rules, 1963.
• The appellants argued that the acquisition was for a public purpose, namely establishing a university, and that they had complied with Part VII of the Act and the Land Acquisition (Companies) Rules, 1963.
• They highlighted that the possession of 3342 acres of acquired land and 495 acres of Government land was handed over to them, and compensation of Rs. 41.96 crores was disbursed.
• They also submitted that rehabilitation measures were taken as per the State Government’s policy.
• They relied on the case of Delhi Administration Vs. Gurdip Singh Uban and Ors., (2000) 7 SCC 296, to argue that personal objections are deemed waived if not raised.
• They cited V. Chandrasekaran and Anr. Vs. Administrative Officer and Ors., (2012) 12 SCC 133, to argue that if one land loser challenges the acquisition, others cannot take advantage if they did not file objections under Section 5A.

Respondents’ Arguments (Landowners and PIL Petitioners):

• The respondents argued that the land was identified by the company, not the government, and that the government acted arbitrarily by favoring the company.
• They submitted that the Vedanta Foundation had no prior experience in education and the government provided undue largesse to the company.
• They contended that the company was not a public company at the time of initiating the acquisition proceedings.
• They argued that the acquisition process violated the Land Acquisition Act, 1894, and the Land Acquisition (Companies) Rules, 1963, including non-compliance with Sections 39, 40, and 41, and Rules 3 and 4.
• They submitted that the Collector did not conduct a proper inquiry under Section 5A, and that the entire process was vitiated by arbitrariness.
• They argued that the acquisition violated environmental norms, as the land was near a wildlife sanctuary and had two rivers flowing through it.
• They relied on S.P. Gupta Vs. Union of India, 1981 Supp SCC 87, Bandhua Mukti Morcha Vs. Union of India, (1984) 3 SCC 161, and Public Union for Civil Liberties Vs. State of T.N., (2013) 1 SCC 585, to support the maintainability of the PIL.
• They cited Devinder Singh Vs. State of Punjab, (2008) 1 SCC 728 and City Montessori School Vs. State of U.P., (2009) 14 SCC 253, to argue that Part VII of the Act and the Rules require strict compliance.
• They highlighted that the conversion of the company from private to public was a mala fide act to circumvent the law.
• They argued that the Section 41 agreement was executed on a false premise and in violation of Section 17(3A)(3).

Submissions Table:

Innovativeness of the Argument: The respondents innovatively argued that the conversion of the company from private to public was a mala fide act to circumvent the law, highlighting the lack of genuine public character of the company. The respondents also emphasized the environmental impact of the project, which was a critical factor in the court’s decision.

Issues Framed by the Supreme Court

The High Court of Orissa framed 15 key issues for consideration, which were upheld by the Supreme Court. These are:

1. Whether the Anil Agarwal Foundation is a public company and can a private guarantee limited company be converted to a public company under Section 25 of the Companies Act?
2. Whether the State Government can acquire land for the proposed Vedanta University under Section 44-B of the Land Acquisition Act, 1894?
3. Whether the State Government could initiate acquisition proceedings without complying with Sections 39, 41, 42 of the Land Acquisition Act, 1894, 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 of the Land Acquisition Act, 1894, even without objections? (B) Whether the Collector was required to submit a report under Rule 4 of the Land Acquisition (Companies) Rules, 1963?
5. (A) Whether the landowners waived their rights by not filing objections? (B) Whether there was delay in filing the writ petitions?
6. Whether the Core Committee appointed by the State Government complied with Section 40(2) of the Land Acquisition Act, 1894, and whether it can dispense with Rules 3 and 4 of the Land Acquisition (Companies) Rules, 1963?
7. Whether the State Government complied with Rules 3(2) and 4 of the Land Acquisition (Companies) Rules, 1963, and whether the Collector submitted a report to the State Government?
8. Whether the beneficiary company executed a valid Memorandum of Understanding (MoU) under Section 41 of the Land Acquisition Act, 1894?
9. Whether the MoU dated 19/07/2006 was a valid agreement under Section 41 of the Act?
10. Whether the Collector determined the approximate compensation as required under Sections 23 and 24 of the Land Acquisition Act, 1894?
11. Whether awards were passed in compliance with Sections 9, 10, and 11 of the Land Acquisition Act, 1894, and whether possession was taken under Section 16?
12. (A) Whether the notifications were legal, given the presence of a Wildlife Sanctuary and rivers? (B) Whether the acquisition violated environmental laws?
13. Whether the PIL must succeed if issues 12(A) and (B) are answered in favor of the appellants and for violation of any provisions of Land Acquisition Act as well as Land Acquisition (Companies) Rules, 1963?
14. Whether the acquisition proceedings are liable to be quashed if the petitioners have made out a case?
15. 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 Supreme Court considered several authorities in its judgment, categorized by the legal points they addressed:

On Public Interest Litigation (PIL):

• S.P. Gupta Vs. Union of India, 1981 Supp SCC 87: This case established that any member of the public with sufficient interest can maintain an action for judicial redress for public injury.
• Bandhua Mukti Morcha Vs. Union of India, (1984) 3 SCC 161: This case emphasized the role of PIL in protecting the rights of the poor and marginalized.
• Public Union for Civil Liberties Vs. State of T.N., (2013) 1 SCC 585: This case further clarified the scope and purpose of PIL in ensuring justice for vulnerable sections of society.
• People’s Union for Democratic Rights Vs. Union of lndia, (1982) 3 SCC 235: This case highlighted the importance of public interest litigation in addressing violations of constitutional and legal rights of large numbers of people who are poor, ignorant or in a socially or economically disadvantaged position.
• Janata Dal Vs. H.S. Chowdhary, AIR 1993 SC 892: This case clarified that only a person acting bona fide with sufficient interest in the proceeding of PIL will alone have a locus standi and can approach the court.
• State of Uttaranchal Vs. Balwant Singh Chaufal & Ors., (2010) 3 SCC 402: This case traces the origin and evolution of public interest litigation in India.

On Compliance with Land Acquisition Act and Rules:

• Devinder Singh Vs. State of Punjab, (2008) 1 SCC 728: This case emphasized the strict compliance required with Part VII of the Land Acquisition Act, 1894, and the Land Acquisition (Companies) Rules, 1963.
• City Montessori School Vs. State of U.P., (2009) 14 SCC 253: This case reiterated the need for strict adherence to the procedures outlined in Part VII of the Act and the Rules.
• HMT House Building Cooperative Society Vs. Syed Khader & Ors., AIR 1995 SC 2244: This case held that prior approval of the Government is required under Section 44-A and if the same is not followed, the entire acquisition proceedings can be quashed.

On Waiver of Objections:

• Delhi Administration Vs. Gurdip Singh Uban and Ors., (2000) 7 SCC 296: This case held that personal nature objections are deemed to be waived if not raised.

On the Effect of Challenge by One Landowner:

• V. Chandrasekaran and Anr. Vs. Administrative Officer and Ors., (2012) 12 SCC 133: This case held that if the acquisition is challenged by one land loser, others cannot take advantage if they have not filed objection under Section 5A.

Legal Provisions:

• Section 4(1) of the Land Acquisition Act, 1894: Deals with the initial notification for land acquisition.
• Section 5A of the Land Acquisition Act, 1894: Outlines the procedure for hearing objections to the acquisition.
• Section 6 of the Land Acquisition Act, 1894: Deals with the declaration of land acquisition.
• Section 39 of the Land Acquisition Act, 1894: Mandates prior consent for land acquisition for companies.
• Section 40 of the Land Acquisition Act, 1894: Outlines the conditions for giving consent for land acquisition for companies.
• Section 41 of the Land Acquisition Act, 1894: Mandates an agreement between the government and the company.
• Section 44B of the Land Acquisition Act, 1894: Restricts land acquisition for private companies.
• Rule 3 of the Land Acquisition (Companies) Rules, 1963: Deals with the constitution of the Land Acquisition Committee.
• Rule 4 of the Land Acquisition (Companies) Rules, 1963: Specifies the matters to be considered before initiating acquisition proceedings.

Authorities Table:

Judgment

How each submission made by the Parties was treated by the Court?

Court’s Reasoning:

• The Supreme Court upheld the High Court’s decision, dismissing the appeal of the Anil Agarwal Foundation.
• The Court found that the acquisition process was flawed from its inception, as the Anil Agarwal Foundation was a private company at the time of initiation, and the conversion to a public company was not bona fide.
• The Court held that the State Government had not followed the mandatory procedures under Part VII of the Land Acquisition Act, 1894, and the Land Acquisition (Companies) Rules, 1963. Specifically, there was a lack of proper inquiry under Rule 4, and no prior consent under Section 39.
• The Court emphasized that the Collector did not conduct a proper inquiry under Section 5A, and that the entire process was vitiated by arbitrariness and favouritism.
• The Court observed that the land was identified by the company, not the government, and that the company lacked prior experience in education, which further highlighted the arbitrariness of the process.
• The Court also noted that the acquisition violated environmental norms, as the land was near a wildlife sanctuary and had two rivers flowing through it, which were not considered during the acquisition process.
• The Court rejected the appellants’ arguments that the objections under Section 5A were waived, and that the High Court erred in quashing the entire acquisition. The court held that the High Court was justified in entertaining the PIL, and that the acquisition was vitiated by statutory violations.
• The Court distinguished the cases cited by the appellants, holding that they were not applicable to the present case, which involved fundamental violations of the law and public interest.
• The Court held that the PIL was maintainable due to the violations of the Land Acquisition Act and Rules, and that the High Court had rightly quashed the acquisition proceedings.

Final Decision:

The Supreme Court dismissed the appeal of the Anil Agarwal Foundation and upheld the High Court’s decision to quash the land acquisition proceedings. The Court directed that the possession of the acquired lands be restored to the respective landowners, who were to refund the compensation received. The Court also quashed the grant of government land to the beneficiary company, directing the State Government to resume the leased lands. The judgment emphasized the importance of adhering to statutory procedures and protecting the rights of marginalized communities.

Flowchart

Conclusion

The Supreme Court’s judgment in the Vedanta University case serves as a significant reminder of the importance of adhering to statutory procedures in land acquisition processes. The case highlights the need for transparency and accountability, especially when dealing with large-scale acquisitions that impact marginalized communities. The Court’s emphasis on the strict compliance with Part VII of the Land Acquisition Act, 1894, and the Land Acquisition (Companies) Rules, 1963, underscores the judiciary’s role in protecting the rights of landowners and ensuring that the acquisition process is fair and just. The judgment also reaffirms the importance of Public Interest Litigation (PIL) in addressing violations of constitutional and legal rights, particularly for vulnerable sections of society. The case serves as a precedent for future land acquisition cases, emphasizing the need for due diligence, adherence to legal procedures, and the protection of environmental norms.