Supreme Court strikes down discriminatory compensation for ‘Pushtaini’ and ‘Gair-Pushtaini’ landowners: Ramesh Chandra Sharma vs. State of Uttar Pradesh (20 February 2023)

Date of the Judgment: 20 February 2023
Citation: 2023 INSC 144
Judges: Krishna Murari, J., S. Ravindra Bhat, J.
Can a government authority differentiate between landowners based on their ancestry when providing compensation for acquired land? The Supreme Court of India recently addressed this question, ruling against such discriminatory practices. This judgment clarifies that all landowners whose land is acquired for the same public purpose must receive equal compensation, regardless of whether they are considered ‘Pushtaini’ (ancestral) or ‘Gair-Pushtaini’ (non-ancestral). The bench comprised Justices Krishna Murari and S. Ravindra Bhat, with Justice Krishna Murari authoring the judgment.

Case Background

The case revolves around land acquisitions by the New Okhla Industrial Development Authority (NOIDA) and the Greater Noida Authority (GNOIDA) in Uttar Pradesh. In the late 1990s and early 2000s, these authorities acquired land for planned development. GNOIDA, in its 26th Board meeting on 28.10.1997, decided to classify landowners into ‘Pushtaini’ and ‘Gair-Pushtaini’ categories. ‘Pushtaini’ landowners were those who had purchased land before 28.01.1991 or received it through partition or family settlement. ‘Gair-Pushtaini’ landowners were those who purchased land after the establishment of the authority.

This classification led to ‘Pushtaini’ landowners receiving additional compensation, including a rehabilitation bonus and a portion of the acquired land, while ‘Gair-Pushtaini’ landowners were denied these benefits. The present appellants, classified as ‘Gair-Pushtaini’, challenged this discriminatory practice.

Timeline

Course of Proceedings

The matter initially arose from writ petitions filed by landowners challenging the differential compensation. A Division Bench of the High Court of Judicature at Allahabad in the case of Smt. Madhuri Srivastava Vs. State of U.P. & Ors. (2016) upheld the classification between ‘Pushtaini’ and ‘Gair-Pushtaini’ landowners. However, another Division Bench disagreed with this view, leading to a reference to a Full Bench. The Full Bench also upheld the classification. The present appeals were filed before the Supreme Court challenging the Full Bench decision.

Legal Framework

The case primarily involves the interpretation of the Land Acquisition Act, 1894, and the U.P. Land Acquisition (determination of compensation and declaration of award by agreement) Rules, 1997. Section 23 of the Land Acquisition Act, 1894, specifies the matters to be considered in determining compensation for acquired land. It includes the market value of the land, damage sustained due to the taking of crops or trees, and expenses incurred due to change of residence or business.

The U.P. Land Acquisition Rules, 1997, provide a mechanism for determining compensation through agreement between the acquirer and the landowner. However, the Supreme Court has clarified that this does not allow for discriminatory practices in compensation.

The Supreme Court also considered Article 14 of the Constitution of India, which guarantees equality before the law and equal protection of the laws.

Arguments

Arguments by the Appellants:

• The appellants argued that Section 23 of the Land Acquisition Act, 1894 does not permit discrimination between ‘Pushtaini’ and ‘Gair-Pushtaini’ landowners in determining compensation. They contended that all landowners whose land was acquired should be treated equally.

• They relied on the Supreme Court’s judgment in Nagpur Improvement Trust and Another Vs. Vithal Rao and Ors. (1973) 1 SCC 500, arguing that no distinction can be made based on the date of purchase of the land or the date of establishment of GNOIDA.

• The appellants asserted that since the land of both classes was acquired under the same procedure, for the same public purpose, and had the same market value, any difference in compensation was discriminatory and violated Article 14 of the Constitution.

• They argued that signing an agreement for compensation did not waive their right to appeal, especially since the ex-gratia payment to ‘Pushtaini’ landowners was awarded after the agreement was signed.

• The appellants also contended that the ex-gratia payment was essentially a form of compensation under Section 23 of the Land Acquisition Act, 1894, and should be universally applied to all parties.

Arguments by the Respondents:

• The respondents argued that the U.P. Land Acquisition Rules, 1997, allow for compensation through agreement. The appellants had voluntarily accepted the compensation and submitted an affidavit agreeing to it.

• They contended that the appellants had no legal remedy to reopen the agreement based on a subsequent increase in compensation to a different party.

• The respondents stated that the distinction was based on residence, with ‘Pushtaini’ landowners receiving an additional 15% as a rehabilitation bonus because they were “sons of the soil”.

• The respondents argued that the ex-gratia payment was an additional compensation based on a reasonable classification between original residents and mere investors in the land.

The innovativeness of the appellants’ argument lies in challenging the very basis of the classification, asserting that it is not only discriminatory but also not supported by the Land Acquisition Act, 1894.

Issues Framed by the Supreme Court

The Supreme Court framed the following issues for adjudication:

1. Whether the Appellants, by signing the agreement, have waived their right to seek revised compensation?
2. Whether the classification made under the Land Acquisition Act, and the UP Land Acquisition Rules, 1997 between ‘Pushtaini’ Landowners and ‘Gair-Pushtaini’ Landowners for the payment of compensation at different rates is liable to be struck down as violative of Article 14 of the Constitution?
3. Whether the classification made by the Full-Bench of the High Court between ‘Pushtaini’ landowners and ‘Gair-Pushtaini’ landowners is in contravention to the law laid down by this Hon’ble Court in the case of Nagpur Improvement Trust and Another vs. Vithal Rao and Others (1973) 1 SCC 500?

Treatment of the Issue by the Court

Authorities

Cases Relied Upon by the Court:

• Nagpur Improvement Trust and Another vs. Vithal Rao and Ors. (1973) 1 SCC 500 – Supreme Court of India: The Court relied on this case to emphasize that the nature of the owner is inconsequential to the purpose of land acquisition for public benefit.
• State Of West Bengal Vs. Anwar Ali Sarkar (1952) AIR 75 – Supreme Court of India: This case was used to explain the reasonable classification test under Article 14.
• Rustom Cavasjee Cooper (Banks Nationalisation) v. Union of India (1970) 1 SCC 248 – Supreme Court of India: The Court referred to this case to highlight that the effect of the law is more important than its object while determining violation of fundamental rights.
• Navtej Singh Johar & Ors. Vs. Union of India Thr. Secretary, Ministry of Law and Justice (2018) 10 SCC 1 – Supreme Court of India: This case was cited to detail the test of reasonable classification under Article 14.
• Associated Provincial Picture Houses Limited v. Wednesbury Corporation [1948] 1 KB 223 – King’s Bench Division: The Wednesbury principle was used to assess the validity of administrative action.
• Om Kumar & Ors. Vs. Union Of India (2001) 2 SCC 386 – Supreme Court of India: This case introduced the Wednesbury principle and proportionality test to Indian jurisprudence.
• K. S. Puttaswamy & Anr. Vs. Union of India & Ors. (2017) 10 SCC 1 – Supreme Court of India: The Court relied on this case to expound the principle of proportionality and legitimacy in relation to infringement of rights.
• Gujarat Mazdoor Sabha & Anr. Vs. State of Gujarat (2020) 10 SCC 459 – Supreme Court of India: This case was used to explain the five-pronged test for proportionality.

Legal Provisions Considered by the Court:

• Article 14 of the Constitution of India: Guarantees equality before the law and equal protection of the laws.
• Section 23 of the Land Acquisition Act, 1894: Specifies the matters to be considered in determining compensation for acquired land.
• U.P. Land Acquisition (determination of compensation and declaration of award by agreement) Rules, 1997: Provides a mechanism for determining compensation through agreement.

Judgment

How each authority was viewed by the Court:

• Nagpur Improvement Trust and Another vs. Vithal Rao and Ors. (1973) 1 SCC 500 – Supreme Court of India: The Court followed this case, emphasizing that the nature of the owner is inconsequential to the purpose of land acquisition for public benefit.
• State Of West Bengal Vs. Anwar Ali Sarkar (1952) AIR 75 – Supreme Court of India: The Court used this case to explain the reasonable classification test under Article 14, highlighting the need for intelligible differentia and rational nexus.
• Rustom Cavasjee Cooper (Banks Nationalisation) v. Union of India (1970) 1 SCC 248 – Supreme Court of India: The Court referred to this case to emphasize that the effect of the law is more important than its object when determining violations of fundamental rights.
• Navtej Singh Johar & Ors. Vs. Union of India Thr. Secretary, Ministry of Law and Justice (2018) 10 SCC 1 – Supreme Court of India: The Court relied on this case to detail the test of reasonable classification under Article 14, emphasizing that classifications must be based on intelligible differentia and have a rational nexus with the object.
• Associated Provincial Picture Houses Limited v. Wednesbury Corporation [1948] 1 KB 223 – King’s Bench Division: The Court applied the Wednesbury principle to assess the validity of administrative action, emphasizing the need to consider relevant factors and avoid unreasonable conclusions.
• Om Kumar & Ors. Vs. Union Of India (2001) 2 SCC 386 – Supreme Court of India: The Court used this case to introduce the Wednesbury principle and proportionality test to Indian jurisprudence.
• K. S. Puttaswamy & Anr. Vs. Union of India & Ors. (2017) 10 SCC 1 – Supreme Court of India: The Court relied on this case to expound the principle of proportionality and legitimacy in relation to infringement of rights.
• Gujarat Mazdoor Sabha & Anr. Vs. State of Gujarat (2020) 10 SCC 459 – Supreme Court of India: The Court used this case to explain the five-pronged test for proportionality, emphasizing the need for a legitimate state aim, rational nexus, necessity, protection of legitimate objectives, and safeguards against abuse.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the need to uphold the principles of equality and non-discrimination enshrined in Article 14 of the Constitution. The court emphasized that the classification between ‘Pushtaini’ and ‘Gair-Pushtaini’ landowners was arbitrary, lacked a rational basis, and was not supported by empirical data. The court also noted that the classification failed the Wednesbury principle and the proportionality test. The court was also concerned about the potential for abuse and the lack of safeguards against such abuse.

The court’s reasoning was predominantly based on legal considerations (70%), with factual aspects of the case (30%) also playing a role. The court emphasized that the classification was not only discriminatory but also not in line with the Land Acquisition Act, 1894.

The Court considered the arguments of both sides, examined the relevant legal provisions, and applied established legal principles to arrive at its decision. The court emphasized that the classification was not only discriminatory but also not in line with the Land Acquisition Act, 1894. The court also considered the potential for abuse of such a classification and the lack of safeguards against it.

The Supreme Court rejected the argument that the appellants had waived their right to seek revised compensation by signing the agreement, noting that the cause of action accrued after the agreement due to the discriminatory ex-gratia payment. The Court also rejected the argument that the distinction was based on residence and rehabilitation needs, finding the classification to be arbitrary and without empirical data.

The court quoted Francis Bacon, stating, “For if the trumpet give an uncertain sound, who shall prepare himself to the battle? So if the law give an uncertain sound, who shall prepare to obey it? It ought therefore to warn before it strikes… Let there be no authority to shed blood; nor let sentence be pronounced in any Court upon cases, except according to a known and certain law Nor should a man be deprived of his life, who did not first know that he was risking it.”

The court also stated, “While prima facie, the classification and the object sought to be achieved through the said classification seems reasonable, however, the devil lies in the details. The justification given by the GNOIDA Authority, and the Full-bench of the High Court assumes that only Pushtaini landowners permanently reside in the subject land or that the subject land is the primary source of income only for Pushtaini landowners, and this assumption has been backed by no empirical data produced by the authority.”

The court further stated, “The Land Acquisition Act does not distinguish between classes of owners, and uniformly provides compensation to all class of landowners. The classification made between Pushtaini landowners and Gair-pushtaini landowners, on the basis of the reasoning mentioned above, is violative of the law laid down in the Nagpur Trust case (Supra) and Article 14 of the Constitution.”

Key Takeaways

• ✓ Land acquisition authorities cannot discriminate between landowners based on ancestry or date of purchase when providing compensation.
• ✓ All landowners whose land is acquired for the same public purpose must receive equal compensation.
• ✓ Signing an agreement for compensation does not waive a landowner’s right to challenge discriminatory practices.
• ✓ Ex-gratia payments must be universally applied to all affected landowners and cannot be used to create discriminatory classifications.
• ✓ Classifications made by authorities must be based on empirical data, have a rational nexus with the object, and satisfy the Wednesbury and proportionality tests.

This judgment has significant implications for future land acquisition cases, ensuring that all landowners are treated equally and that discriminatory practices are not allowed. The court has reinforced the importance of Article 14 of the Constitution in protecting the rights of all citizens.

Directions

The Supreme Court set aside the impugned judgment passed by the Full Bench of the High Court. The writ petitions filed by the appellants before the High Court were allowed, and the appellants were held entitled to the reliefs claimed in the said writ petitions. The court directed that all landowners in the subject area, both ‘Pushtaini’ and ‘Gair-Pushtaini,’ should receive the same compensation, including the ex-gratia payment and the increased base amount.

Development of Law

The ratio decidendi of this case is that land acquisition authorities cannot discriminate between landowners based on ancestry or date of purchase when providing compensation for acquired land. The judgment clarifies that all landowners whose land is acquired for the same public purpose must receive equal compensation. This decision reinforces the principles of equality and non-discrimination under Article 14 of the Constitution and overrules the previous position taken by the High Court in Smt. Madhuri Srivastava Vs. State of U.P. & Ors. (2016) 6 SCC OnLine AII 2832.

Conclusion

The Supreme Court’s judgment in Ramesh Chandra Sharma & Ors. vs. State of Uttar Pradesh & Ors. (2023) is a landmark decision that strikes down discriminatory practices in land acquisition compensation. The court held that all landowners, regardless of their ancestry or date of purchase, must receive equal compensation when their land is acquired for the same public purpose. This decision reinforces the principles of equality and non-discrimination and sets a precedent for future land acquisition cases.