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LAND ACQUISITION IN INDIA I

As a society changes from an agrarian to an industrial one, landuse patterns change

accordingly industrial plants are built on farmland and wide open spaces of

sparsely-populated villages give way to apartment blocks housing people by the

hundreds. As India witnesses an economic metamorphosis and attendant

demographic changes, landuse patterns here are also changing. However, the

process is generating considerable friction in the country. Very high density of

population, total dependence on land for livelihood and perhaps most importantly,

land acquisition policies that have remained broadly the same as those in the

colonial era make for a dangerous cocktail that frequently catches fire, singes the

ruling dispensation of the day and makes headlines for a few days before dying

down till the next cycle erupts. The latest eruption in this long saga of unrest over

land acquisition recently occurred in some villages of Uttar Pradesh, where

protesting farmers and police clashed in a series of violent confrontations.

Unfortunately, it was not long before the entire issue became trivialised into petty

politics with charges, counter charges, allegations and rebuttals flying thick and fast.

A new law to replace the archaic Land Acquisition Act 1894 has been gathering dust

due to lack of political consensus in the ruling alliance. In the meanwhile, land

acquisition continues to remain a deeply contentious issue.

In two articles, we examine the legal framework for land acquisition in India,

highlight its weaknesses, and identify the chief features of the proposed new law

and other initiatives taken to make land acquisition less painful for the evictees. In

this article, we examine the situation as it exists. Next week, we take a look a

proposed reforms pertaining to land acquisition.

LAND ACQUISITION ACT 1894

The Land Acquisition Act 1894 continues to provide the legal framework for

acquisition of privately held property by the government. This law facilitates

acquisition of land by government for public purposes.

Acquisition is different from purchase, as in the case of acquisition, the owners

consent is not necessary. Acquisition can be done against the wishes of property

owners and compensation is paid for the property being acquired. Quiteimportantly, this compensation is determined by the government and need not be

linked to market prices. A purchase on the other hand, is predicated on the consent

of the owner to sell and payment of a mutually-agreed price, which invariably would

be market-determined.

The logic underlying compulsory acquisition of property flows from the philosophy

of Utilitarianism which subsumes individual rights to community good. The state, in

this instance, exercises the Power of Eminent Domain, forcing a property owner to

surrender his/her ownership to the state or an authorised agency for use by the

state or its agencies.

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PROCEDURE FOR LAND ACQUISITION

The procedure for land acquisition as given in the Land Acquisition Act 1894 is

outlined below.

1. The government (central/state) determines that it needs land for a publicpurpose and identifies the piece of land to be acquired for this purpose;

2. A notification to this effect is published in the official Gazette. A summary ofthis notice is published by the collector(s) of the district(s) where the land to be

acquired is located. The government notification must also be published in at

least two newspapers, one of which is in the regional language of the place

where land acquisition is to take place;

3. Within 30 days of such notification, objections to acquisition have to be given tothe Collectors office in writing;

4. At the expiry of the period of 30 days, the collector forwards all objections withcomments to the government, whose decision on the matter shall be final;

5.

After disposing of the issues raised in the collectors report, the government hasto publish a Declaration of Intention to acquire land. This declaration must

follow the same guidelines as the earlier notification;

6. The collector issues a notice to all persons interested to appear in an enquiry tobe held before him. This enquiry deals with key aspects such as the area of

land, compensation etc;

7. After the enquiry, and with approval of the government, the collector makes anaward that details the following:

a. The true area of the land;b. The compensation, which in his opinion should be allowed for the

land; and

c. The apportionment of the said compensation among the personsinterested.

8. The government can take over possession of the land once compensation ispaid. After this, the government has absolutely unencumbered rights over the

land and can put the land to any use it deems fit;

9. Under Section 17 of the Act, the government can take over possession of landeven without paying compensation, in cases of urgency. Compensation will

have to be paid eventually;

10. The actual amount of compensation is determined in accordance with themarket value of the land as it exists on the date of the 1

stnotification;

11. Process of land acquisition has to be completed within 2 years from the date ofthe first notification, failing which the whole procedure will have to be started

from scratch;

12. The process can be cancelled any time before completion, but cannot bereversed once it is finished and possession acquired by the government.

CONSTITUTIONAL PROVISIONS

The Constitution, as originally enacted, had provisions under Articles 19 (1)(f) and

Article 31 which constituted the Fundamental Right to Property.

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Article 19(1)(f) stated that all citizens shall have the right to acquire, hold and

dispose of property. Further, Article 31(1) stated, No person shall be deprived of

his property save by authority of law.

The government faced legal obstacles to its land reforms programme due to these

rights. In order to surmount this difficulty, 1

st

Amendment to the constitution, (inpart), inserted Articles 31A and 31B, besides the Ninth Schedule to the constitution.

Article 31A states (in part)Not withstanding anything contained in Art 13, no law

providing for the acquisition by the state of any estate or any rights therein, Shall

be void on the ground that it is inconsistent with or takes away or abridges any

fundamental rights

The Ninth Schedule effectively places the laws put in it beyond the scope of judicial

review. After a recent Supreme Court ruling, judicial review for laws placed in the 9th

Schedule after the Kesavananda Bharati judgement has been restored.

Following a series of amendments that progressively diluted the Right to Property,

the 42nd

Amendment of 1976 repealed Article 19(1)(f). Article 31 was repealed and

replaced by Article 300A No person shall be deprived of his property save by

authority of law.

This amendment relegated a fundamental right to the status of an ordinary legal

right.

This is an important distinction. In case of violation of a persons fundamental

right(s), he/she can directly approach the Supreme Court for grant of relief through

any of the six appropriate writsHabeas Corpus, Mandamus, Certiorari, Prohibition

and Quo Warranto. Perhaps more importantly, the Court cannot refuse to issue a

writ, even on the pretext that the litigant has prayed for the wrong writ. In this case,

the Court would direct the litigant to file a petition asking for the proper writ.

However, for redress in violation of a legal right, a citizen has to go through the

grind of the entire judicial system, and his/her appeal can be thrown out at any

stage. Thus, the fundamental right to property has been wiped out in India.

Acquisition and Requisition of property falls in the Concurrent List, implying both

the central and state governments have jurisdiction on the matter. Consequently, a

number of state-specific legislations providing for land acquisition exist side-by-side

with the Land Acquisition Act 1894.

PUBLIC PURPOSE

As per Article 31(2), the state can acquire land only for public purpose. However,

the constitution does not define the term.

As per Section 3(f) of the Land Acquisition Act, public purpose as includes (but is not

limited to) the following:

a. Settlement of new villages or development, extension or improvement ofvillage sites;

b. Provision of land for urban or rural planning;

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c. Provision of land for planned development from public funds as perprovisions of a Government policy and disposal of the developed land (in

whole or parts) by outright sale, lease or by any other mechanism, with the

object of securing further development as planned;

d. Provision of land for a public company;e. Provision of land for developing housing for poor, landless, people affected

by calamities or people displaced due to a state scheme/policy;

f. Provision of land for an educational, housing, health or slum clearancescheme sponsored by the state or a body designated for the purpose by the

state;

g. Provision of land for any other development scheme of the state;h. Provision of a premises or building for establishment of a public office, but

not office of a company.

In an important ruling, the Supreme Court recently held that ruled that the

acquisition of land by a state government for development of a project to serve the

larger public good would be legal and valid, even when such project would be

executed by a private entity.

The Court said that in case of integrated and indivisible project, the project has to

be taken as a whole and must be judged whether it is in the larger public interest. A

holistic approach has to be adopted in such matters.

This ruling legitimizes the role of state in facilitating land acquisition. Acquisition of

land for industries has been a contentious issue for quite some while now, with

several Special Economic Zones and other industrial projects facing hurdles.

So far, a narrow interpretation of public purpose entitled the state to acquire large

tracts of land only if every component of the project to be set up on the acquired

land passed the test of public benefit. The fallout of this judgment is significant as

the court upheld development of infrastructure as legal and legitimate public

purpose.

WEAKNESSES IN THE CURRENT LAND ACQUISITION

MECHANISM

The current legal framework for land acquisition has come in for criticism in the light

of a number of instances of protests by people whose land is acquired, particularly

since the policy of Special Economic Zones (SEZs) was adopted. Major criticisms of

the land acquisition framework are:

a. The question over what constitutes public purpose is not satisfactorilysettled yet;

b. Marginalised communities, tribals and backward classes have been themajor victims of land acquisition. The present policy has a number of

weaknesses with respect to these communities:

i. Most of the tribal communities have a system ofcommunal ownership of assets and cannot produce

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ownership documents. As such, they are treated as

encroachers and paid hardly any compensation, if at all;

ii. These communities are heavily dependent on land forsustenance and livelihood. Forced displacement, even

with compensation, often causes irreparable damage to

their livelihood security;

iii. Sharecroppers, tenants and similar occupants of land arenot fairly treated by the present laws, as they get a very

minor share of the total compensation, even as they

suffer the maximum damage to their livelihood

c. Price of land being acquired does not reflect the economic value of theland. Following development, the same land is sold at much higher

prices while the original owners do not receive their fair share of the

economic value of land;

d. The acquisition policy focuses on immediate payment of monetarycompensation, without due regard to educating the people about

utilising the money judiciously, and also not paying much attention to

their future livelihood. This creates severe disruptions in the lives of

the displaced population.

In numerous judgements, the Supreme Court has held that factors such as market

value of land, location of the land, the loss of income suffered by the land owner

and availability of basic amenities such as water and electricity must be considered

while arriving at a fair compensation for acquisition of land. In a judgement, the

Court has said that the "fixation of compensation under the Land Acquisition Act

involves an element of rational guess work."

It is thus clear that the present mechanism of land acquisition in in serious need of

an overhaul so that interests of the evictees are better protected than at present. A

bill to amend the Land Acquisition Act the Land Acquisition (Amendment) Bill is

pending since 2007. In addition, there are numerous suggestions from other sources

regarding changes needed in the mechanism. The next weeks lead essay would

take a look at these issues in some detail.

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LAND ACQUISITION IN INDIA II

In Part I of this article, we examined the legal framework for land acquisition as it

exists at present, and also took note of the deficiencies in this framework. In this

part, we discuss the (lapsed) Land Acquisition (Amendment) Bill 2007, proposals by

the National Advisory Council (NAC) and also look at Land Acquisition Policies of

some states.

LAND ACQUISITION (AMENDMENT) BILL 2007

The Land Acquisition (Amendment) Bill was tabled in the Lok Sabha in December

2007 and referred to a Parliamentary Standing Committee. The Committee

submitted its report on the Bill in October 2008 and it was passed by the 14th

Lok

Sabha on the last day of its last session. Under provisions of the Constitution, the Bill

lapsed on end of the Lok Sabhas term. It will now have to be re-introduced in the

Parliament. Main provisions of the Bill were:

1. The 2007 Bill restricted land acquisition by government to only threecategories:

a. When land is needed for use by the navy, army, air force or forstrategic purposes;

b. When land is needed for public infrastructure projects; andc. In cases where a project beneficial to public where at least 70% of

the land has already been purchased from the public by the

project implementing agency.

Government role in this case was retained so that large projects,

that require contiguous land, are not held up by a minority of

landowners.

2. If the land acquisition would displace 400 families (or more) in plains or 200families (or more) in hilly, tribal and desert areas, a Social Impact

Assessment of the project must be carried out to determine if the social

benefits of the project would be more than its social costs.

3. In an important provision, lower courts would not hear cases related to landacquisition. All such disputes would be first addressed by a Compensation

Dispute Settlement Authority (at state for acquisition by the state

government and at the national level for acquisition by the central

government). Appeal against decisions of these authorities would be heard

by the respective High Courts and the Supreme Court.

4. Time restrictions were introduced on validity of notification for landacquisition:

a. The appropriate government would have to issue anotification regarding its intention to acquire land. This has to

be published in the Official Gazette and at least two daily

newspapers circulating in the locality where acquisition is to

take place;

b. After this notification is published, government can carry outfeasibility studies to assess suitability of the land for intended

purposes;

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c. If the land is found suitable, the government must issue adeclaration stating the land will be used for public purpose.

This declaration has to be issues within one year of the

original notification, failing which it (declaration) cannot be

issued for one year. In case a declaration is not issued even on

expiry of this period, a declaration cannot be made for five

years;

d. Until a final notification for land acquisition is issued, nofurther work on notified land can be taken up.

5. The mechanism for computing compensation was completely revisedfrom the Land Acquisition Act 1894 (LAA):

a. The mechanism for computing compensation was completelyrevised from the Land Acquisition Act 1894 (LAA). Whereas

the LAA explicitly prohibits taking the intended use of

acquired land into consideration for calculating

compensation, the 2007 Bill said the reverse. Under

provisions of the Bill, market value of the land plus 60% was

to be paid as compensation.

b. The market value was to be arrived at on the basis ofintended use of land. This provision would immensely benefit

farmers whose agricultural land is acquired for construction of

Special Economic Zones and townships, for example.

c. Mechanism to be followed for determining value of land forcompensation:

i. The highest value among: The minimum land value for the area as per

land registry values;

The average sale price of at least 50% of thehigher priced sales of similar land in the village

or vicinity;

The average sale price of at least 50% of thehigher priced land purchased for the project.

ii. Compensation amount would include value of trees,plants, or standing crops damaged;

iii. If land registry prices are not available or if the landis in an area where land sales have been restricted,the state government shall set the floor price per

unit of land, which would be determined by average

prices of at least 50% of the higher priced land in the

vicinity.

d. In addition to landowners, tenants, tribals and othertraditional forest dwellers would also be compensated;

6. If land not being acquired is damaged during the process,compensation has to be paid for the same as well;

7. Compensation must be paid within one year from the date of thedeclaration. This time can be extended by six months but a penalty@5% per month would be imposed in this case;

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8. For land acquired under urgency provisions, 75% premium overmarket prices shall have to be paid as opposed to 60% in normal cases;

9. When land is being acquired for a company, 20-50% of thecompensation amount has to be offered in the form of shares or

debentures of the company. The land owner is free to choose this

option or go for a full cash payment;

10. The authority/agency acquiring land will have to bear the followingcosts in addition to compensation for acquired land:

i. Costs for suffering or loss caused by acquisition;ii. Payment for damages to the land during acquisition;

iii. Cost of land needed for resettlement of displacedresidents;

iv. Cost of infrastructure development at theresettlement sites; and,

Administrative costs of acquisition and resettlement.

11. If the acquired land stays unused for 5 years from the date ofpossession, it has to be returned to the appropriate government;

12. On sale of acquired land to another party, 80% of the differencebetween the sale price and amount paid as compensation has to be

shared among the original land owners and their heirs.

The Land Acquisition (Amendment) Bill 2007 was tabled with a complementary

legislation The Rehabilitation and Resettlement Bill, 2007 that was intended to

provide for the rehabilitation and resettlement of people displaced by natural

disasters or by the acquisition of land by the government. It also lapsed with the end

of the 14th

Lok Sabha.

THE NAC RECOMMENDATIONS ON LAND ACQUISITION The powerful National Advisory Council (NAC), headed by UPA Chairperson Sonia

Gandhi, has recently made a number of recommendations on the Land Acquisition

Bill. These are summarised below.

1. The Land Acquisition Act 1894 should be repealed;2. The Land Acquisition Bill and the Resettlement and Rehabilitation Bill

should be combined into a new single, comprehensive law - National

Development, Acquisition, Displacement and Rehabilitation Act;3. Landowners should be paid six times the registered sale deed value as

compensation and also be compensated for being displaced;

4. Compensation has to be paid to the landowner and all people whoselivelihoods were dependent on land being acquired. Non-owners

should be paid a grant amounting to 10 days minimum wages every

month for 33 years.

5. Compensation should be paid into into accounts held jointly by menand women to minimise the chances of men blowing up the money;

6. The option of acquiring less fertile and wastelands should beexplored before turning to agricultural land;

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7. If the acquired land is resold, the original owners should get a 25 percent share of the transaction, every time;

8. If land acquired for a public purpose was not used within five years, itshould be returned to its original owners;

9. The urgency clause should be invoked only if land is needed fornational security and defence use;

10. Some press reports also said that the NAC favours full governmentcontrol of the land acquisition process, as opposed to the 70:30 option

in the Land Acquisition Bill 2007. However, the NAC press release is

silent on this aspect.

LAND ACQUISITION POLICY OF UTTAR PRADESH

Following widespread trouble over land acquisition in the state and the pursuant

political tamasha, the Uttar Pradesh government recently unveiled a new land

acquisition policy that substantially raises benefits for farmers. Key highlights fromthe policy are summarised below.

1. For purposes of acquisition, land to be classified into three categories;2. The first category is land for use by the private sector for purposes such as

setting up of industries, power projects etc. Provisions applicable in this

case are:

a. Land to be acquired directly by the private entity. Governmentrole limited to facilitation;

b. If 70% of landowners agree to sell land at mutually-agreed prices,government to invoke Land Acquisition Act for the remaining 30%

and intervene in land acquisition;

c. If 70% landholders do not agree to sell the land, the project wouldbe reconsidered;

d. Farmers to have the option of getting back 16% of the acquiredland after development. Farmers also have to be paid an annuity

@Rs 23,000/acre for the next 33 years (with annual increment of

Rs 800) and other benefits as outlined in the state Rehabilitation

and Resettlement Policy of 2010;

e. If a farmer does not want the entire 16% of redeveloped land, hecan choose a mix of cash compensation and redeveloped land;

f. No charges, including stamp duties, to be paid by farmers fortaking possession of redeveloped land;

g. No stamp duty to be paid by a farmer whose land has beenacquired if he uses the compensation amount to purchase

farmland anywhere in the state within one year of acquisition.

3. The second category is land for public purposes such as for construction ofroads, canals etc being built by the government. Provisions in this case are:

a. All those affected by the acquisition would get benefits of the R&RPolicy of 2010 which promises an annuity @Rs 23,000/acre (with

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annual increment of Rs 800) and other benefits, in addition to the

compensation for land;

b. No stamp duty to be paid by a farmer whose land has beenacquired if he uses the compensation amount to purchase

farmland anywhere in the state.

4. The third category covers cases where land acquisition is throughgovernment agencies such as land development authorities, industrial

development authorities etc. Provisions applicable in this case are:

a. Farmers have the option of either selling their land at mutuallyagreed rates or to take back 16% of their acquired land in

developed form;

b. In both cases, farmers would be eligible for benefits of the R&Rpolicy of 2010 which promises an annuity for 33 years etc.

c. The farmers would also get stamp duty waiver for buyingagricultural land elsewhere from the compensation amount;

d. If the land being acquired by the development authority is forsome private company then the farmer can also exercise the

option of acquiring equity shares of the company upto 25% of the

compensation amount.

5. If farmers do not wish to receive annuities, provision for lumpsum paymenthas also been made;

6. One member of the family whose entire land holding is acquired for theprivate sector would be provided a job in the company;

7. For the loss of livelihood, families would also get additional compensationcalculated at rates payable to agricultural labour. This compensation wouldbe paid for five years;

8. Families whose landholdings are reduced to small or marginal in size wouldalso get additional compensation calculated at different rates.

9. Developers would also have to construct a Kisan Bhawan and a modelschool till class 8 in each affected village.

LAND ACQUISITION POLICY OF HARYANA

The state of Haryana was among the first in India to come up with a land acquisition

policy that took care of interests of people whose land (and/or livelihood) were

being forcibly taken away for public purpose. In fact, the revised national land

acquisition policy and the policy of UP government as discussed above draw a lot

from Haryana.

Broadly, the land acquisition policy in Harayana has the same features as the UP

Policy discussed above, with variations in rates and classification of land. One major

innovation introduced by Haryana in 2010 is the No Litigation Incentive. Under this

incentive, designed to reduce avoidable litigation around land acquisition, an

additional 20% of the basic rate of land determined by the Land Acquisition

Collector would be paid as an incentive to landowners do not challenge the

acquisition of their land, and accept the compensation awarded as final.

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CONCLUSIONOver two essays, we have examined the statutory and constitutional framework

regarding forced acquisition of property by the state and have examined the

deficiencies in the present approach, as well as attempts to rectify the same. While

the Land Acquisition Bill 2007 has lapsed, the government is likely to introduce a

revised version of the same in the coming monsoon session of parliament. However,

with the powerful NAC now recommending government role in land acquisition,

even for private industries, and also advocating an integrated approach to

acquisition, resettlement and rehabilitation, we might see further delays in the

process. Some states, most notably Haryana and Uttar Pradesh have come up with

fairly progressive acquisition policies.

However, there is still lack of total political agreement on the contours that an

acquisition policy needs to take. In addition, the draft laws also suffer from some

defects. For example, the Land Acquisition Bill 2007 and many state policies make it

mandatory for profits from sale of acquired land to be shared with the originallandowners or their heirs. When such transactions are part of a larger exercise such

as a company takeover, for example, it is not easy to determine the exact profit on a

part of assets. In addition, how are the organisations going to keep track of the

landowner and/or heirs in perpetuity? Similarly, the NACs idea of paying six times

the registered value defies explanation. Why six times? Why not ten times or four

times? Such arbitrary valuations would face many challenges if implemented.

The need for well thought-out and people friendly land acquisition policies, both at

the central and state levels, is imperative because as we grow, a very large volume

of land is going to be diverted away from present usage. Some mega projects such

as the Delhi-Mumbai Industrial Project, the Freight Corridor Project of Indian

Railways, plans to set up nuclear reactors in several states etc., cannot proceed

without a land acquisition policy that suitably compensates evictees for loss of land

and livelihood.