Supreme Court Strikes Down Discriminatory Land Compensation: Ramesh Chandra Sharma vs. State of Uttar Pradesh (20 February 2023)

Introduction

Date of the Judgment: 20 February 2023
Citation: 2023 INSC 128
Judges: Hon’ble Justices Krishna Murari and S. Ravindra Bhat
Can a government authority pay different rates of compensation for land acquisition based on whether the landowner is considered an “original resident” or not? The Supreme Court of India recently addressed this question, examining the legality of such a distinction. The core issue was whether the Greater Noida Authority could classify landowners as “Pushtaini” (ancestral) and “Gair-Pushtaini” (non-ancestral) for the purpose of compensation, granting additional benefits to the former. This judgment was authored by Hon’ble Justice Krishna Murari, with Hon’ble Justice S. Ravindra Bhat concurring.

Case Background

In the early 1970s, India experienced rapid economic growth, leading to a large migration to Delhi. To manage this influx, the government developed residential and industrial areas around the capital, including the New Okhla Industrial Development Authority (NOIDA) and Greater Noida. The Uttar Pradesh Government created Greater Noida in 1991, encompassing 124 villages. For planned development, Greater Noida began acquiring land under the Land Acquisition Act, 1894. Notifications were issued in 2005 and 2006 for acquiring 580.1734 hectares of land. A Full Bench of the High Court in the Gajraj case ruled that the urgency clause was wrongly invoked but saved the acquisition, ordering additional compensation and allotment of developed land. Before these acquisitions, Greater Noida classified landowners as “Pushtaini” (those who owned land before 28 January 1991, or inherited it) and “Gair-Pushtaini” (those who purchased land after this date). “Pushtaini” landowners received higher compensation. In 2006, an agreement was made with landowners, paying “Pushtaini” landowners Rs. 322 per sq. yard and “Gair-Pushtaini” landowners Rs. 280 per sq. yard. A committee was formed in 2008 to consider further compensation, recommending Rs. 310 per square meter as ex-gratia payment only to “Pushtaini” farmers. This decision was approved by the State Government in 2009.

Timeline

Course of Proceedings

Initially, several writ petitions were filed by landholders challenging the NOIDA Board of Directors’ decision to differentiate compensation between “Pushtaini” and “Gair-Pushtaini” landowners. A Division Bench of the High Court dismissed these petitions, upholding the classification as reasonable for rehabilitating original residents. Subsequently, the present appellants filed similar petitions challenging Greater Noida’s classification. Another Division Bench disagreed with the earlier ruling and referred the matter to a larger bench. The Full Bench framed two questions: whether the earlier Division Bench ruling conflicted with Supreme Court precedent and the Land Acquisition Act, and whether the “Pushtaini”/”Gair-Pushtaini” classification was reasonable. The Full Bench upheld the classification, leading to the current appeals before the Supreme Court.

Legal Framework

The case revolves around the interpretation of the Land Acquisition Act, 1894, particularly Section 23, which outlines the factors to be considered when determining compensation for acquired land. Section 23 of the Land Acquisition Act, 1894 states:
“23. Matters to be considered in determining compensation. – (1) In determining the amount of compensation to be awarded for land acquired under this Act, the Court shall take into consideration first, the market value of the land at the date of the publication of the [notification under section 4, sub-section (1)]; secondly, the damage sustained by the person interested, by reason of the taking of any standing crops trees which may be on the land at the time of the Collector’s taking possession thereof; thirdly, the damage (if any) sustained by the person interested, at the time of the Collector’s taking possession of the land, by reason of serving such land from his other land; fourthly, the damage (if any) sustained by the person interested, at the time of the Collector’s taking possession of the land, by reason of the acquisition injuriously affecting his other property, movable or immovable, in any other manner, or his earnings; fifthly, in consequence of the acquisition of the land by the Collector, the person interested is compelled to change his residence or place of business, the reasonable expenses (if any) incidental to such change, and sixthly, the damage (if any) bona fide resulting from diminution of the profits of the land between the time of the publication of the declaration under section 6 and the time of the Collector’s taking possession of the land.”
The U.P. Land Acquisition (Determination of Compensation and Declaration of Award by Agreement) Rules, 1997, also play a role, as they provide a mechanism for compensation through agreement between the acquirer and the landowner. The Court also considered Article 14 of the Constitution, which guarantees equality before the law and equal protection of the laws.

Arguments

Appellants’ Arguments:

• ✓ Section 23 of the Land Acquisition Act, 1894, does not allow for discrimination between “Pushtaini” and “Gair-Pushtaini” landowners in determining compensation.
• ✓ All landowners whose land was acquired should be treated equally, regardless of when they purchased the land, as per the law laid down in the Nagpur Improvement Trust case.
• ✓ The land of both classes was acquired under the same procedure, for the same public purpose, and with the same market value. Therefore, any difference in compensation is discriminatory and violates Article 14 of the Constitution.
• ✓ Signing an agreement does not waive the right to appeal the compensation, especially since the ex-gratia payment to “Pushtaini” landowners was awarded after the agreement.
• ✓ Ex-gratia payment is a form of compensation under Section 23 of the Land Acquisition Act, 1894, and must be universally applied.

Respondents’ Arguments:

• ✓ The U.P. Land Acquisition Rules, 1997, allow for compensation through agreement. The appellants voluntarily accepted the compensation and submitted an affidavit agreeing to it.
• ✓ There is no legal remedy to re-open the agreement based on a subsequent increase in compensation to a different party.
• ✓ The distinction between the two classes is based on residence, with “Pushtaini” landowners being original residents and “Gair-Pushtaini” landowners being investors. The additional 15% given to “Pushtaini” landowners is a rehabilitation bonus.
• ✓ The ex-gratia payment is an additional compensation based on the classification between “sons of the soil” and mere investors. The payment is based on reasonable classification and is not violative of Article 14.

The core of the appellants’ argument is that the classification is arbitrary and discriminatory, violating Article 14 of the Constitution. The respondents argue that the classification is reasonable and linked to the object of rehabilitating original residents.

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

The Court considered the following authorities:

On Reasonable Classification and Article 14:

• State Of West Bengal Vs. Anwar Ali Sarkar [1952 AIR 75], Supreme Court of India: Established the reasonable classification test under Article 14.
• Rustom Cavasjee Cooper (Banks Nationalisation) v. Union of India [ (1970) 1 SCC 248], Supreme Court of India: Stressed that courts will look into the effect of the impugned act and not the object.
• Navtej Singh Johar & Ors. Vs. Union of India Thr. Secretary, Ministry of Law and Justice [(2018) 10 SCC 1], Supreme Court of India: Detailed the test of reasonable classification under Article 14.

On Wednesbury Principle:

• Associated Provincial Picture Houses Limited v. Wednesbury Corporation [1948] 1 KB 223, King’s Bench Division: Established the principle of judicial review of administrative decisions.
• Om Kumar & Ors. Vs. Union Of India [(2001) 2 SCC 386], Supreme Court of India: Introduced the Wednesbury principle to Indian jurisprudence.

On Proportionality Test:

• Om Kumar & Ors. Vs. Union Of India [(2001) 2 SCC 386], Supreme Court of India: Introduced the proportionality test to Indian jurisprudence.
• K. S. Puttaswamy & Anr. Vs. Union of India & Ors. [(2017) 10 SCC 1], Supreme Court of India: Expounded the principle of proportionality in relation to infringement of rights.
• Gujarat Mazdoor Sabha & Anr. Vs. State of Gujarat [(2020) 10 SCC 459], Supreme Court of India: Detailed the five-pronged test for proportionality.

On Land Acquisition and Compensation:

• Nagpur Improvement Trust and Another Vs. Vithal Rao and Ors. [(1973) 1 SCC 500], Supreme Court of India: Held that authorities cannot distinguish between types of owners for compensation.

Legal Provisions:

• Section 23, Land Acquisition Act, 1894: Specifies the matters to be considered in determining compensation for land acquisition.
• Article 14, Constitution of India: Guarantees equality before the law and equal protection of the laws.
• U.P. Land Acquisition (Determination of Compensation and Declaration of Award by Agreement) Rules, 1997: Provides for compensation through agreement.

Judgment

The Supreme Court analyzed the submissions and authorities, ultimately ruling against the differential compensation. The Court held that the classification between “Pushtaini” and “Gair-Pushtaini” landowners was arbitrary and violated Article 14 of the Constitution. The Court also found that the classification contravened the principles laid down in the Nagpur Improvement Trust case. The Court emphasized that the Land Acquisition Act, 1894, does not provide for such a classification and that compensation must be determined uniformly, considering factors such as market value, damage, and rehabilitation expenses.

How each authority was viewed by the Court?

• State Of West Bengal Vs. Anwar Ali Sarkar [1952 AIR 75], Supreme Court of India*: The court applied the principles of reasonable classification as laid down in this case.
• Rustom Cavasjee Cooper (Banks Nationalisation) v. Union of India [ (1970) 1 SCC 248], Supreme Court of India*: The court emphasized that the effect of the impugned act is more important than the object.
• 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 applied the principles of reasonable classification as laid down in this case.
• Associated Provincial Picture Houses Limited v. Wednesbury Corporation [1948] 1 KB 223, King’s Bench Division*: The court applied the principles of judicial review as laid down in this case.
• Om Kumar & Ors. Vs. Union Of India [(2001) 2 SCC 386], Supreme Court of India*: The court applied the principles of judicial review and proportionality test as laid down in this case.
• K. S. Puttaswamy & Anr. Vs. Union of India & Ors. [(2017) 10 SCC 1], Supreme Court of India*: The court applied the principles of proportionality in relation to infringement of rights.
• Gujarat Mazdoor Sabha & Anr. Vs. State of Gujarat [(2020) 10 SCC 459], Supreme Court of India*: The court applied the five-pronged test for proportionality.
• 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 strike down the classification based on the type of landowner.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the principles of equality and non-discrimination enshrined in Article 14 of the Constitution. The Court found the classification between “Pushtaini” and “Gair-Pushtaini” landowners to be arbitrary and lacking a rational basis. The Court emphasized the importance of treating all landowners equally under the law, especially in matters of compensation for land acquisition. The Court also highlighted the need for empirical data to justify any classification that differentiates between groups of people. The court was also influenced by the fact that the classification was not in consonance with the parent statute, i.e., the Land Acquisition Act, 1894.

Fact:Law Ratio

The court’s reasoning was heavily influenced by legal principles and provisions (70%), with a lesser emphasis on the factual aspects of the case (30%).

Logical Reasoning:

The court systematically analyzed the classification against established legal principles and found it to be invalid.

The court rejected the argument that the agreement signed by the appellants waived their right to challenge the compensation, stating that the cause of action arose after the agreement. The court also rejected the argument that the classification was reasonable, stating that it was arbitrary and lacked a rational nexus with the object sought to be achieved. The court emphasized that the Land Acquisition Act, 1894, does not provide for such a classification and that compensation must be determined uniformly. The court also considered the principles of natural justice and fair play, stating that all landowners should be treated equally under the law.

The Court also considered the principle of proportionality, stating that the classification was not proportionate to the object sought to be achieved. The Court held that the classification was more drastic than necessary and that there were other less restrictive means of achieving the same objective. The Court also considered the principle of Wednesbury unreasonableness, stating that the classification was so unreasonable that no reasonable authority could have come to the same conclusion.

The Court observed that the classification was based on conjectures and surmises and that any claim to differentiate between classes of persons must be backed by empirical data. The Court also held that even if a classification has a rational nexus to the objective of the notification, it must also be legitimized by the parent statute. The Court observed that the Land Acquisition Act, 1894, does not allow for such a classification and that the classification was therefore liable to be struck down.

The Court also observed that the establishment of Greater Noida was done for a noble purpose, but that some residents whose land was subject to acquisition were faced with discrimination. The Court held that it was its duty to dispense justice and rectify the harm caused to those at the receiving end of the discrimination.

“The object itself cannot be discriminatory, for otherwise, for instance, if the object is to discriminate against one section of the minority the discrimination cannot be justified on the ground that there is a reasonable classification because it has rational relation to the object sought to be achieved.”

“The classification made by GNOIDA does not find its footing in the Land Acquisition Act, or the UP-Land Acquisition Rules, and hence is contrary to law. The said classification also suffers from not taking into account relevant considerations.”

“The Land Acquisition Act does not distinguish between classes of owners, and uniformly provides compensation to all class of landowners.”

Key Takeaways

• ✓ Differential compensation based on the “Pushtaini” and “Gair-Pushtaini” classification is unconstitutional.
• ✓ All landowners whose land is acquired for the same purpose must receive equal compensation.
• ✓ Agreements signed by landowners do not waive their right to challenge compensation if discriminatory practices are introduced later.
• ✓ Authorities must base classifications on empirical data and ensure that they are in consonance with the parent statute.
• ✓ The principles of equality and non-discrimination must be upheld in all land acquisition processes.

The judgment has significant implications for future land acquisition cases, emphasizing the importance of equal treatment and non-discrimination. It also highlights the need for authorities to adhere to the law and to base their decisions on sound legal principles and empirical evidence.

Directions

The Supreme Court set aside the impugned judgment of the Full Bench of the High Court. The Court allowed the writ petitions filed by the appellants, holding them entitled to the reliefs claimed. The Court directed that the ex-gratia payment and increased base amount as enunciated by the executive actions, must be given to all landowners in the subject area, irrespective of whether they are “Pushtaini” or “Gair-Pushtaini”.

Development of Law

This judgment reinforces the principle that all landowners must be treated equally in matters of compensation for land acquisition. It clarifies that classifications based on arbitrary criteria, such as the date of purchase or perceived “original residency,” are not permissible under the law. The judgment also reaffirms the importance of Article 14 of the Constitution and the need for authorities to act fairly and reasonably.

Impact on Legal Principles:

• Equality before Law: The judgment strongly reinforces the principle of equality before the law, as enshrined in Article 14 of the Constitution.
• Non-discrimination: It clarifies that discrimination based on arbitrary classifications is not permissible in land acquisition and compensation.
• Reasonable Classification: The judgment reiterates the tests for reasonable classification, requiring an intelligible differentia and a rational nexus with the object sought to be achieved.
• Wednesbury Principle: It applies the Wednesbury principle, emphasizing that administrative decisions must be reasonable and not arbitrary.
• Proportionality: It applies the proportionality test, requiring that any restrictions on rights must be proportionate to the object sought to be achieved.
• Interpretation of Land Acquisition Act: The judgment clarifies that the Land Acquisition Act does not permit differential compensation based on the type of landowner.

Conclusion

The Supreme Court’s decision in Ramesh Chandra Sharma vs. State of Uttar Pradesh is a landmark judgment that upholds the principles of equality and non-discrimination in land acquisition. By striking down the discriminatory classification between “Pushtaini” and “Gair-Pushtaini” landowners, the Court has ensured that all landowners are treated fairly and equally under the law. This judgment serves as a reminder that authorities must act within the bounds of the law and respect the fundamental rights of all citizens. The judgment reaffirms the importance of Article 14 of the Constitution and the need for authorities to act fairly and reasonably.