Supreme Court Quashes Karnataka Land Acquisition Over Fraud & Bribery In Housing Society Scheme, Orders Land Restoration To Owners

The Supreme Court on Monday (October 26) set aside the land acquisition proceedings of a privately owned land for construction of a cooperative housing society in Bengaluru, after finding that the private players had lured the state government to approve the proposed extent of land for acquisition, and there was no approved housing scheme or layout plan before acquisition took place.

The Court also directed that possession of the acquired land be restored to the respective landowners, irrespective of whether they had challenged the acquisition. The landowners must refund any compensation received from the government, without interest. The Court clarified that this would not require them to refund amounts received in private transactions.

The bench enhanced the costs payable to each petitioner to ₹50,000. It, however, deleted the direction to initiate contempt proceedings against government officers, considering the passage of time.

According to the Court, a mere approval of the proposed extent of land, without an approved housing scheme and layout plan, would not suffice for land acquisition.

“What is required is not just an approval of the extent and the mere expression of a laudable housing scheme, but housing sites demarcated for allotment to landless members with the detailed descriptive lay-out plan laid before the Government. We find no such scheme having been laid out before the Government.”, observed a bench of Justice J.B. Pardiwala and Justice K. Vinod Chandran, emphasising that the power of eminent domain, being a condemnation of a privately owned for public purpose can only be with authority of law, and presence of a public purpose.

“Condemnation of privately owned land for public purpose can only be with authority of law and with just compensation being paid. That, such authority of law can be exercised only for public purpose, is without cavil; with just compensation being an ancillary right, which does not by itself justify an acquisition. However just the compensation be, if the authority of law is lacking or the public purpose is absent, there can be no eminent domain exercised. The appellants herein allege lack of authority in law; complete absence of public purpose and fraud having vitiated the instant acquisition.”, the Court said, quoting from Winger v. Aires (Supreme Court of Pennsylvania).

The dispute concerned land acquired in Bengaluru for a cooperative housing society. The acquisition proceedings began with a notification under Section 4 of the Land Acquisition Act, 1894, dated November 22, 1988, followed by a declaration under Section 6 dated December 4, 1989.

The landowners challenged the acquisition, alleging that the housing society had agreed with a private intermediary, Bhagya Enterprises, which had undertaken to facilitate the acquisition of land through government machinery in return for payments linked to the progress of the acquisition.

They argued that the acquisition was not genuinely intended to implement a housing scheme for bona fide members but was a colourable exercise of state power that benefited private interests.

The Single Judge of the Karnataka High Court accepted the challenge and quashed the acquisition, finding fraud and irregularities in the process. However, the Division Bench reversed that decision, dismissing the challenge on grounds including delay and res judicata, relying on an earlier decision that had upheld the same acquisition.

Aggrieved the landowners approached the Supreme Court.

Setting aside the impugned Division Bench decision, the judgment authored by Justice Chandran, at the outset, questioned the veracity of the entire land acquisition exercise being vitiated by fraud, after finding that the private players played a crucial role in facilitating land acquisition approval from the government in exchange of bribe, without there being any layout or approved housing scheme before the approval of a proposed extent of land for acquisition.

“…no lay out was finalized before the acquisition was made, further fortifying the argument of the statutory mandate in getting a prior approval of the housing scheme having not been complied with.”, the Court said.

On a conspectus of the above reasoning, the Court was unable to sustain the impugned judgment of the Division Bench, and set it aside and found the instant acquisition vitiated for the following reasons:

"i. An agreement with a third party to facilitate acquisition of lands for developing a housing scheme, with an undertaking to facilitate steps under the LA Act of 1894, even before such housing schemes were brought under the nomenclature of public purpose, clearly exposes the fraud intended to be carried out.

ii. Though, the application was made by the 4th respondent Society after clause (f) was substituted in Section 3 of the LA Act, 1894, by the, the cryptic consideration of the same and the absolute absence of a housing scheme with a proper layout plan placed for the approval of the Government, vitiates the acquisition and reveals the colourable exercise of power.

iii. With respect to the 4th respondent Society, the G.V.K. Rao Committee report clearly found that the membership details were not fully placed before it. The allegation of misplacing of registers by an employee, the verification of memberships not being possible, puts the very formation and continuation of the Society under a cloud.

iv. The Three-Men committee and the SLCC had proceeded in a lackadaisical manner and there is absolutely no application of mind nor a recommendation of a properly laid out housing scheme, for approval by the Government.

v. There is no layout or blueprint of the housing scheme laid before the two committees or the Government for its approval.

vi. The notes in the Government file, as extracted hereinabove, clearly indicates that the amounts to satisfy the award were not paid by the Society to the Government for disbursal to the landowners. Private transactions of payment of money to landowners, without any substantiation were relied on to absolve the Society from making full deposit of the award amounts, again indicating the fraud played on unsuspecting citizens.

vii. The irregularity and illegality in the management of the Societies, as pointed by the G.V.K. Rao Committee, as also the statements made by the office bearers of the 4 th respondent Society, that bribes were paid to the Government Officials, further vitiates the acquisition.”

Appearance:

For Appellant(s) : Mr. Basava Prabhu S. Patil, Sr. Adv. Mr. Abdul Azeem Kalebudde, AOR Mr. Nitish K. N., Adv. Mr. Yashwanth Nethaji N. T., Adv. Ms. Kiran Suri, Sr. Adv. Mr. S.J. Amith, Adv. Ms. Aishwarya Kumar, Adv. Mr. Vishwanath Gururaj Joshi, Adv. Dr. Mrs. Vipin Gupta, AOR Mr. Krishna Kumar, Adv.

For Respondent(s) :Mr. Ankolekar Gurudatta, AOR Mr. Prateek Chadha, A.A.G. Mr. Sanjay Hedge, Sr. Adv. Mr. Omar Hoda, A.A.G. Mr. Sanchit Garga, AOR Mr. Kunal Rana, Adv. Mr. Sanchit Garga, AOR Mr. Shashwat Jaiswal, Adv. Mr. Bhanu Pratap Singh, Adv. Ms. Diksha Arora, Adv. Ms. Diksha Arora, Adv. Ms. Oorja Goel, Adv. Mr. Vijender Kumar, Adv. Mr. Vikas Singh, Sr. Adv. Mrs. Deepeika Kalia, Adv. Mr. Hemant Kumar Sagar, Adv. Mr. Ratnesh Kumar, Adv. Ms. Deepeika Kalia, Adv. Mr. E. C. Vidya Sagar, AOR Mr. Sanjay Hegde, Sr. Adv. Mr. Omar Hoda, A.A.G. Ms. Eesha Bakshi, Adv. Mr. Surya Kiran Singh, Adv. Mr. Kamran Khan, Adv. Mr. Aviral Jain, Adv. Mr. Abhinav Chakravarty, Adv. Ms. Ayesha Khan, Adv.