India: Whether An Allottee Of Land In Land Acquisition Is Really The "person Interested"?

Introduction:

The archaic Land Acquisition Act 1894 ("Land Acquisition Act") has been over a period of time interpreted and reimagined by way of various landmark judgements of the High Courts and the Supreme Court.

Section 18 (1) of the Land Acquisition Act sets out the right of "any person interested" who has not accepted an award made by the Collector under the Act, and may require that the matter be referred to the appropriate Court (i.e., the reference court) for the determination as to the measurement of the land, the amount of the compensation, the persons to whom it is payable, or the apportionment of the compensation among the persons interested. The dichotomy between the existing framework of land acquisition laws vis-a-vis who may be construed as a party "interested" for the purpose of Section 18(1) of the Land Acquisition Act is the main topic for discussion of the present article.

Recently, the Supreme Court of India in the case of Gregory Patrao vs Mangalore Refinery and Petrochemicals Limited [2022 SCC OnLine SC 830], has overturned the final common order and judgment dated 06 September 2021, passed by Karnataka High Court ("KHC") in M.F.A No. 259 of 2021 (LAC) connected with M.F.A No. 259 of 377 (LAC) and M.F.A No. 247 of 2021 (LAC). The KHC vide the impugned order, allowed the appeals filed by Mangalore Refinery and Petrochemicals Limited ("MRPL") against orders passed by the Additional Senior Civil Judge and Chief Judicial Magistrate, Mangalore (the reference court) pertaining to enhanced compensation awarded to the applicants therein in respect of land that had been acquired by the State Government for the benefit of MRPL. The KHC held that the said orders passed by the reference court were unsustainable as MRPL had not been impleaded in the proceeding before the reference court despite being a proper party to the proceedings under law. Accordingly, the KHC applied the ratio of the decision of the Supreme Court in U.P. Awas Evam Vikas Parishad v. Gyan Devi, [(1995) 2 SCC 326], while holding that the ratio of Peerappa Hanmantha Harijan v. State of Karnataka, (2015) 10 SCC 469 was purportedly squarely applicable to the facts of the said matter.

Who is a "person interested"?:

The present article raises the question as to whether the allottee of the land acquired by the State Government is a "person interested" for the purpose of Section 18(1) of the Land Acquisition Act and consequently, whether such allottees are a proper party, in proceedings relating to the determination of enhanced compensation before a reference court initiated pursuant to Section 18 thereof.

As per Section 3(b) of the Land Acquisition Act, the expression "person interested" includes all persons claiming an interest in compensation to be made on account of the acquisition of land under the Land Acquisition Act; and a person shall be deemed to be interested in land if he is interested in an easement affecting the land. At the outset, it is pertinent to keep in mind that generally, the terms of allotment as are executed between the Government and the allottees of land, require the allottee to bear any enhanced compensation that may be awarded under the Land Acquisition Act. Therefore, the party genuinely interested in opposing any request for compensation is naturally, the allottee.

Judicial Protagonism – Evolution of the term "Person Interested":

We have set out some arguments and examined some judicial pronouncements as a device to brainstorm and analyze the extant regime.

Much prior in time, the Supreme Court, in Himalayan Tiles and Marble (P) Limited vs Francis Victor [1980 (3) SCC 223], has held in view of a general consensus of judicial opinion that the expression "person interested' in the context of Section 18(1) of the Land Acquisition Act, must be inclusive and ought to be liberally construed to include a company for whose benefit the land is acquired and who is bound under an agreement to pay compensation.

This view of the Supreme Court was upheld by a constitutional bench of the Supreme Court in U.P. Awas Evam Vikas Parishad (supra).

However, the decision in U.P. Awas Evam Vikas Parishad (supra) does not appear to have been fully considered or discussed in view of specific distinguishing factors in Peerappa Hanmantha Harijan (supra) as to how the obiter and ratio contained in Himalayan Tiles and Marble (P) Limited vs Francis Victor (supra) and U.P. Awas Evam Vikas Parishad (supra) are distinguishable in the overall application of the existing framework of the land acquisition laws. The Supreme Court in Peerappa Hanmantha Harijan (supra) plainly observes that:

"62. ... none of the said judgments relied upon are applicable to the fact situation in the present case for the reason that those cases dealt with reference to the acquisition of land under the provisions of the LA Act, either in favour of the company or development authorities, whereas in the case on hand, the acquisition proceedings have been initiated under the KIAD Act for industrial development by KIADB."

In view of the above, even if it is assumed that an allottee of the land in question is not a "beneficiary" of the said allotted land, it is undisputed that it is bound to pay compensation (including enhanced compensation) under the agreement entered into between it and the relevant government body, and is, therefore, a "person interested", in view of the ratio provided in Gregory Patrao vs MRPL (supra).

Factually, both Sections 18 and 20 of the Land Acquisition Act fall under Part III thereof, which deals with "Reference to Court and Procedure thereon". Like in Section 18 of the Land Acquisition Act, Section 20 thereof also uses the phrase "persons interested" in the context that in case of the institution of proceedings under Section 18, the reference court shall direct appearance of all persons interested in the objection, except such (if any) of them as have consented without protest to receive payment of the compensation awarded, who must be heard before the reference court. Similarly, Section 29(4) of the Karnataka Industrial Areas Development Act, 1966 ("KIAD Act") also provides for the service of notice to all persons "known or believed to be interested".

From a perusal of the analysis above, it appears that it cannot be said that the phrase "persons interested" can have different meanings in the two similarly placed statutes, given that they both fall under similar titles being- "Reference to Court and Procedure thereon". Accordingly, the interpretation accorded to the aforesaid title in Himalayan Tiles and Marble (P) Limited (supra) must also be accorded to Section 20 of the Land Acquisition Act. Consequently, the allottee of the land in question is evidently a "person interested" (by virtue of being the allottee of the land and having to bear the financial consequences of the enhancement) and is therefore a proper party before a reference court, which in turn determines the compensation payable to the original landowner.

Further, Section 50 of the Land Acquisition Act applies to the acquisition of land in favour of a company by the State Government by following the mandatory procedure contemplated under Part VII of the Land Acquisition Act. Section 50 of the Land Acquisition Act falls in Chapter VII thereof under the heading "Miscellaneous" and the said provision is applicable to land acquisitions for companies, whether such acquisition is under Part VII. Accordingly, the allottee is also a "person interested" in terms of Section 50(2) of the Land Acquisition Act which provides that if any land is acquired at the cost of any fund managed or controlled by a local authority or a company, the company concerned may appear before a collector or court to adduce evidence for determining the amount of compensation.

In the case of Delhi Development Authority vs Bhola Nath Sharma (Dead) by L.Rs. and Ors., (2011) 2 SCC 54, the Supreme Court observed that Section 50(2) of the Land Acquisition Act represents statutory embodiment of one of the facets of the rules of natural justice. The object underlying this section is to afford an opportunity to the local authority or company to participate in the proceedings held before the Collector or the Court for determining the amount of compensation and to show that claim made by the landowner for payment of compensation is legally untenable or unjustified. This may be possible only if the Collector or the concerned Court gives notice to the local authority or the concerned company as to who is the acquirer. If such a notice is not duly issued, the local authority or the company cannot avail the opportunity envisaged in Section 50(2) to adduce evidence for the purpose of determining the amount of compensation. Therefore, even though the plain language of that section does not, in terms, cast a duty on the Collector or the Court to issue notice to the local authority or the company to appear and adduce evidence, the said requirement has to be read as being implicit in the provision or else, the same becomes illusory, defeating the intent of the legislature.

However, it is pertinent to highlight that Section 4(1) of the Land Acquisition Act requires the notification relating to the acquisition of land to specify the company for which the land is intended to be acquired for. The said provision is absent in various State enactments such as the KIAD Act. Therefore, there exists a possibility to argue that issuance of notice to an acquirer is not mandatory. In this context, the Supreme Court in P. Narayanappa and Anr vs State of Karnataka & Ors [(2006) 7 SCC 578] had plainly held that at the stage of preliminary notification under Section 28(1) of the KIAD Act, the nature of the activity which may be done by some entrepreneur or a company who has given a proposal for setting up an industry is not necessary.

Similarly, in Babu Barkya Thakur vs The State of Bombay & Others [AIR 1960 SC 1203], it was held that it is not absolutely necessary to the validity of the land acquisition proceedings that the statement "land in any locality is needed or is likely to be needed for any other purpose or for the Company" should find a place in the notification actually issued under Section 4(1) of the Land Acquisition Act. The requirement of the law will be satisfied if, in substance, it can be found on investigation, an appropriate Government is satisfied as a result of such investigation that the land was intended for the purposes of the Company, which would amount to a public purpose.

Exploring the concept of natural justice: Is the allottee who is actually using the land in question, a "person interested"?:

At this juncture, it becomes germane to appreciate that most of all, for reasons of fairness, justice and equity, an allottee of the land in question cannot be made liable to bear the financial burden of the enhancement awarded, without being provided a fair chance at contesting/ proper contestation for bearing the burden of paying an enhancement award. The failure to implead the allottee of the land before a reference court evidently may entail unfair avoidance of opposition to the claim for enhancement and non-representation of the ultimate bearer of costs, which would singularly lead to injustice and compromise of commercial prudence.

Even otherwise, the Supreme Court in U.P. Awas Evam Vikas Parishad (supra) has specifically observed that a local authority, even when not impleaded at the reference stage, is well within its rights to file an appeal against an award, if it is prejudiced. Further, it was held that the principles of natural justice, as a part of procedural law developed by this Court and English courts have been applied and extended to quasi-judicial proceedings and administrative matters so as to ensure that no one is adversely affected without reasonable opportunity and fair hearing. No order can be passed without hearing a person if it entails civil consequences. In situations where even though a person has no enforceable right, yet of such person is affected or likely to be affected by the order passed by a public authority, the courts have evolved the doctrine of legitimate expectation. Fair procedure and just treatment are at the core of our jurisprudence. No one should suffer for omission in law or technicalities in rules. Therefore, when the law permits the local body to lead evidence, then it is implicit in it that the local authority can legitimately expect to be informed or intimated of the proceedings. It would be in consonance with principle of fairness. Otherwise, the right to lead evidence shall hang on the off chance of the allottee having come to know of the proceedings.

The aforementioned ratio laid by the Supreme Court does not appear to have been fully considered or even distinguished subsequently in Peerappa Hanmantha Harijan (supra). Accordingly, even if it is presumed that the allottee of the land in question does not have any right to be impleaded in the proceedings before the reference court, the principles of natural justice and the doctrine of legitimate expectation would be attracted so as to ensure that the allottee of the land in question is not rendered remediless while being burdened with the financial implications of the orders passed by the reference court in the absence of any opposition to the enhancement.

Our views:

In the above background, in view of the settled position of law, as upheld by the Supreme Court from time to time, we are of the view that notice to the person for whose benefit the land is acquired or who is responsible for payment of compensation amount is a right conferred upon such entity both at the stage of making an award by the Special Land Acquisition Officer or any other authority so designated as well as before the reference court. However, the Supreme Court recently appears to have adopted a distinct view in Gregory Patrao vs MRPL judgment (supra), which in turn has created much scope and space for the present constructive deliberation. Considering that under the terms of allotment, it is the allottee who must bear any compensation payable by the Government to the original owners of land, it is only fair and equitable that the allottee is considered a necessary party before the Court deciding on such enhancement. It will be interesting to see how the Supreme Court considers this dichotomy in the extant regime, in ensuing matters to carve out a course that protects the interest of all "persons interested".

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