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LAND ACQUISITON

There is significant controversy around the Ordinance promulgated in 2014 and

the bill introduced in 2015 in the Parliament to amend the Right to Fair

Compensation and Transparency in Land Acquisition, Rehabilitation and

Resettlement Act, 2013.

Without going into the controversies surrounding the bill introduced in 2015 –

which has seen 9 amendments already prior to putting it to vote in the Lok Sabha,

and with the PM acknowledging during the Mann ki Baat (March 2015) that the

ordinance was brought out in a hurry.

This write is to explore other options and the pathway for moving from the present

to the future using the alternative options.

But before that a little bit of history.

Land Acquisition for public use/ purposes is also known as the power of the state

called “Eminent Domain”. It was first coined by a Dutch Jurist Hugo Grotius in

1625 in his legal treatise De Jure Belli et Pacis. 1

The concept of Eminent Domain has been accepted in India too. In Supreme Court

judgement dated May 02, 1952 in The State of Bihar vs. Kameshwar Singh [1952 1

SCR 889]. It has been defined as

“…..The Power of the sovereign to take property for public use without the

owner’s consent upon making just compensation” 2 {emphasis added}

The judgment continues to go on to state in the same Paragraph

The meaning of the power in its irreducible terms is

(a) Power to take

(b) Without the owner’s consent

(c) For Public use.

The concept of public use is inextricably related to an appropriate exercise of the

power and is considered essential in any statement of its meaning.

Payment of compensation, though not an essential ingredient of the connotation of

the term, is an essential element of the valid exercise of such power.

This judgement was related to the act of abolishing zamindari.

The Right to Property was enshrined in Articles 19(1)(f) and 31 of the Constitution

as a fundamental right. However, with the 44th Amendment of the Constitution in

1978, the fundamental right was replaced by a statutory right – that is the right

could be abrogated by an act. This was done by deleting the Articles cited above

and replaced in Article 300A.

1 Wikipedia http://en.wikipedia.org/wiki/Eminent_domain and SC court judgment cited 2 Para 47 of the judgement cited

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The Right to Fair Compensation and Transparency in Land Acquisition,

Rehabilitation and Resettlement Act, 2013 has attempted to break one of the

shackles of Eminent Domain by introducing the concept of participation of the local

self governments and Gram Sabhas for land acquisition for industrialisation,

development of essential infrastructural facilities and urbanisation with the least

disturbance of the owners of the land and other affected families. The affected

persons are expected to be partners in the development leading to their post

acquisition social and economic status.3

What is the alternative?

The concept of the alternative process for land acquisition is embedded in

economics and some of the associated regulatory environment prevailing globally.

The fundamentals of economics is based on certain concepts, which are

Economics is the science of allocation of scarce resources

It is for improving the overall development of the people

It recognises 4 factors of production (economic development). These are

o Land

o Labour

o Capital

o Entrepreneurship.

The current models for each of the factors of production are as follows

Capital Government has moved from controlling and active participation in

the process of raising capital for economic enterprises to establishing

a regulator – viz., Securities and Exchange Board of India: SEBI. It is

a generally acknowledged fact that SEBI is doing good work and is

managing the affairs of capital markets well.

In addition, capital (in the economic sense) is also being managed by

the Reserve Bank of India – RBI. And the work done by RBI in the

monetary management of the country has been applauded globally,

particularly after the Asian crisis and the global financial crisis.

Thus SEBI and RBI are functioning as regulators of this aspect of the

factor of production.

Entrepreneurship The government is always providing incentives for

development of the entrepreneurship in the citizens through various

measures – through building an enabling environment for its growth.

Land acquisition is also a measure in this regard. However, it is the

opinion of the author that time has come for the Government/ State

to change its role in this aspect.

3 Preamble to the 2013 Act.

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Labour This is an area identified for reforms and Rajasthan has taken the

lead in amending the labour laws. Unionisation is an accepted form of

negotiations and government has no role to play except through the

chief labour commissioner. The intervention of the Regional Labour

Commissioner is related to dispute resolution. It is time for change in

its role also as that being recommended for land.

Land In the regulatory environment for land, Government/ State is playing

the role of an intermediary between the land owner and the intended

land user. The function of Government is governance and ensuring

level playing field for the players is ensured, except in cases of

national emergency, when it may acquire rights of access to property.

The intention of this write is to promote the concept of a regulator for

land acquisition and all other matters related to real estate. This is

further elaborated in this write.

Land Acquisition has been a contentious issue and resulted in many unwarranted

situations in peaceful areas. According to a study, there have been 252 land

conflicts spread over 165 districts, spanning practically all states during 2013-14.

This is an increase of over 40% over 2012, when an earlier study recorded 177

disputes over 130 districts. 4

Highlights of issues with State functioning as an Intermediary in Land

Acquisition

The Supreme Court definition of Eminent Domain has included public use and just

compensation as embedded concepts in the land acquisition process. What is just

compensation? And who will decide whether the compensation is just?

The current dispensations with the State acting as an intermediary does not justify

that either of the two qualifiers for Eminent Domain have been satisfied, when the

acquisition is by the State.

Public Use

Special Economic Zones attracted significant attention resulting in massive

acquisition of land by the State for economic development. According to CAG

report no 21 of 2014,

o 52.81% of the land allotted remained idle even though approvals

dated back to 2006. [Audit conducted between November 2013 and

January 2014]. 576 formal approvals of SEZs covering 60,374.76

hectares has been granted in the country. Of which 392 SEZs

covering 45,635.63 hectares have been notified till March 2014. And

of the 392 SEZs, only 152 have become operational – 28,488.49

hectares. The land allotted to the remaining 424 SEZs – 31,886.27

hectares was not put to use.

4 http://economictimes.indiatimes.com/news/politicsandnation/landacquisitionignitesmutiniesstudy/

articleshow/46754871.cms?prtpage=1

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o Land acquired for public purposes was subsequently diverted (up to

100% in some cases) after de- notification.

o The monitoring mechanism, in the opinion of CAG, was inadequate –

although it was stated to be adequate by DCs, Developers and Units.

o The acquisition of land from the public by the government is proving

to be a major transfer of wealth from rural populace to the corporate

world.

It has been observed that PSUs are also not failing to develop the land

acquired, and sometimes land acquisition takes place by PSUs even without

a pre-feasibility report being prepared. 5

Just Compensation

The matter related to the rehabilitation and resettlement of the Sardar

Sarovar Dam is well documented. The Supreme Court is still hearing the

matter for grievance redressal, and the next date has been fixed for April 24,

2015. 6 This reflects that the Grievance Redressal Authority established as

an arm of the State is not a good solution for such activities.

As land is a State Subject under the Constitution, the price will be decided

by the State. As has been adjudged by Bombay High Court in a recent

judgement – State does not fix appropriate price for land acquisition. 7 In the

case, the State had cited financial constraints in fixing a lower price under

the 2013 Act.

o This clearly provides evidence that the 2013 Act is an improvement

over the 1894 Act.

The following are the comments of the author on just compensation.

o Compensation is a function of maintaining status quo in the lifestyle

of all the affected persons by the acquisition. This has been

appreciated by the 2013 Act, in that agricultural labourers are also

covered. Status quo since the decision is forced on the affected

families and not a voluntary decision.

o The 2013 Act links compensation to the market price of the land, and

a multiple thereof to be decided by the State Government. The fact

that State Governments do not take appropriate decisions is reflected

in the Bombay High Court, Aurangabad bench judgment cited above.

o This judgement also highlights the incapacity of the District Collector

to act independent of the State, as the functionary was also a party to

the decision. Under the 2013 Act, the District Collector plays an

important role in the acquisition, rehabilitation and resettlement

process, as also in fixing the compensation.

5 http://www.businessstandard.com/article/printerfriendlyversion?article_id=115033001003_1 6 http://ibnlive.in.com/news/supreme-court-asks-3-states-about-steps-on-rehabilitation-of-narmada-dam-

oustees/533773-3.html 7 Aurangabad bench judgment dated March 09, 2015 in Writ Petition no 4274 of 2014:

Panjabrao vs. State of Maharashtra & Others.

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o In finance theory, Valuation of assets has different methodologies

defined. It is therefore a function of the individual’s valuation, which

may differ from person to person.

Land has different connotations in a rural scenario in India, as

has been highlighted in several reports.

The rural populace is trained in agricultural practices that are

peculiar to that area. Hence taking away the source of

livelihood and not providing “just compensation” is in violation

of Article 21 of the Constitution.

That is the foundation for trading of assets on an exchange.

o Taking a cue from the price determination process from the stock

markets, any news affects the price of the stock. Any news of the

establishment of an infrastructure project or industrial activity

certainly impacts the price of the land being acquired. However the

price determination by the District Collectors is based on the

historical notified market prices of land in that area. Hence it is not a

just determination – the multiplication factor provided for in the 2013

Act may also not be an adequate measure – as has been highlighted

by the judgment of the Aurangabad bench of the Bombay HC,

reference above.

o Governments have also been selective in action in real estate matters

Irregular colonies are being regularised across the countries,

whilst some irregular colonies are being demolished – Campa

Cola Society in Mumbai is a classic case of such

discrimination, where the law is being selectively applied.

Land allocated for a public purpose is being converted to

private purpose – illustratively, SEZs.

o There are two very significant aspects of market pricing of land

Change from Agricultural use to Non Agricultural use

Change of land use by the Government from the original land

use purpose notified for acquisition.

This is best highlighted by the issues in Gurgaon – where certain

persons have made significant monies by getting the terms of land use

changed using their “powers”.

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Alternative Approaches defined

The Planning Commission in their submission “The Manufacturing Plan: Strategies

for Accelerating Growth of Manufacturing in India in the 12th Five Year Plan and

Beyond” has recommended the formation of an autonomous and independent

regulator for land acquisitions. 8

This recommendation was also made by an eminent economist, Pranab Bardhan, to

the West Bengal Government. WB Government has clarified that it will not acquire

land for industry, and that the industry should acquire directly. 9

In March 2015, UP has initiated a programme for a consultative approach for land

acquisition, much on the lines behind the intent of the 2013 Act as indicated in its

Objectives statement, but lacking in the content of the Act. 10

Hence this concept is not novel, and some action is being taken, only it has to be

formalised on the national scale.

The government in 2013 had brought forth a bill titled “The Real Estate (Regulation

and Development) Bill, 2013. This bill was introduced to regulate the transactions

between buyers and promoters of residential real estate projects by establishing

state level regulatory authorities called the Real Estate Regulatory Authorities. This

bill was introduced in the Rajya Sabha on August 14. 2013, as such it continues to

be a valid bill and has not been abrogated due to the dissolution of the 15th Lok

Sabha.

The current track record of regulatory framework in India is significantly better

than the Government’s work in those very areas – Illustratively, telecom, electricity.

Such regulatory framework reduces the political interference, reduces the dispute/

grievance resolution process.

8 Paras 1.3.6 and 5.6.4 of the report. 9 http://www.thehindubusinessline.com/news/states/economistmootsregulatorforlandacquisition/article4282877.ece?css=print

10 http://economictimes.indiatimes.com/news/politicsandnation/landacquisitionsimplifiedinuttarpradesh/articleshow/46609685.cms?prtpage=1

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CONCLUSION

The current format of land acquisition will not improve the situation. The way

forward is to form an autonomous and independent regulatory authority at the

national level. This would be supported by Regulatory Authorities at State Level,

which in turn will have representation at the District Level.

Such authority will look at all matters relating to urban and rural land and real

estate issues.

The process for acquisition may be that followed by IPCL in Gujarat11 – which

would be appropriate for industrial activities. However, for infrastructure projects,

the proposer of the project (private or public) should provide several alternatives for

the land that would be adequate for the purpose. The State would first look at the

land bank that it already has, and then identify other options.

In the process of developing other options, participation of the affected people

would be encouraged. The regulatory authorities thus established would provide a

level playing field to both the parties, and the government will ensure that the

regulatory authorities work within the formulated framework. Our current

regulatory framework in other sectors provides comfort, that we have a capable

regulatory framework in place.

11 http://www.businessstandard.com/article/printerfriendlyversion?article_id=115033000983_1