Supreme Court Holds Board’s Private Deal To Return Acquired Land Illegal, Sets Aside Arbitral Award And High Court Orders

A bench of Chief Justice Sanjiv Khanna and Justice Sanjay Kumar heard the appeal arising from a challenge by the Delhi Agricultural Marketing Board to an arbitral award and consequent High Court orders that had upheld an agreement to return part of land compulsorily acquired under the Land Acquisition Act, 1894. The Board contested the validity of an agreement dated 30.09.1988 and the arbitral award dated 10.07.2007 which directed conveyance of part of the acquired land to the respondent.

The Court allowed the appeal, held that the private agreement amounted to a thwarting of the exercise of sovereign eminent domain and was contrary to public policy, and set aside the arbitral award and the concurrent orders of the Delhi High Court. The Court observed that the facts “turned the law of land acquisition on its head” and described the transaction as “patently opposed to all tenets of law.” The Court, in its reasoning, observed: “When the State uses its sovereign power of eminent domain and acquires land for a public purpose, as in the case on hand, i.e., for establishment of a grain market under the control of a statutory Board, such an exercise cannot be set at naught by the beneficiary of such acquisition, viz., the statutory Board, by entering into a private agreement shortly after the acquisition so as to reverse the usage of the power of eminent domain by the State. Validating this dubious enterprise by a statutory beneficiary of a compulsory acquisition would be nothing short of permitting a fraud on the exercise of such sovereign power by the State. Viewed thus, the agreement dated 30.09.1988 was clearly in contravention of the fundamental policy of Indian law and the Arbitral Award dated 10.07.2007, upholding the said agreement, was equally so.” The Court directed that pending applications stand closed and that parties bear their own costs.

Background The dispute arose from acquisition proceedings initiated in 1963 and declared in 1969 for 33 acres abutting Narela‑Bawana Road to establish a grain market. An award fixing compensation was made on 19.09.1986 and possession was taken on 22.09.1986. Bhagwan Devi claimed title over 6 bighas and 10 biswas by registered deeds and filed W.P. No. 149 of 1987 in the Delhi High Court. The Board executed an agreement on 30.09.1988 to return half of that extent (3 bighas 5 biswas) to Bhagwan Devi in exchange for consideration equal to proportionate compensation; clause (k) provided for reference of disputes to the Chairman of the Board.

The Board later questioned the legality of the transaction, noting that the land vested in the Government upon possession and that no conveyance transferring title to the Board had been executed; it also pointed to the timing and manner of the agreement’s preparation. The Delhi High Court disposed of the writ in 1988 in light of the agreement but later permitted parties to pursue appropriate remedies. Bhagwan Devi invoked arbitration under clause (k) in 2004; the arbitrator upheld the agreement and directed conveyance. The Board filed Section 34 challenge to the award; the Delhi High Court dismissed it on 01.07.2013 and a Division Bench dismissed the Section 37 appeal on 27.09.2013. The Board filed special leave petition in this Court.

The Supreme Court examined the statutory regime — the Land Acquisition Act, 1894; the Agricultural Produce Marketing enactments of 1976 and 1998 — and noted that once possession was taken under Section 16 of the 1894 Act the land vested in the State and withdrawal under Section 48 was not available post‑possession. The Court relied upon Section 34(2)(b) of the Arbitration and Conciliation Act, 1996 and its Explanation that an award in “contravention of the fundamental policy of Indian law” is against public policy. The Court found the agreement devised to reverse compulsory acquisition and described the circumstances of its preparation as suspect; it concluded that the award upholding that agreement conflicted with public policy. The appeal was allowed; the arbitral award dated 10.07.2007 and the two High Court judgments were set aside. The Court also noted interim orders: status quo had been directed by this Court on 28.03.2014 and that the original respondent died in 2015 with legal representatives substituted; an intervention by rival claimants had been filed below.

Case Details: Case No.: Civil Appeal No. 10757 of 2017 Case Title: Delhi Agricultural Marketing Board, through its Chairman … Appellant Versus Bhagwan Devi (Dead), through her LR. … Respondent Appearances: For the Petitioner(s): Counsel not indicated in the judgment For the Respondent(s): Counsel not indicated in the judgment