Supreme Court Upholds Leasehold Rights and Compensation of Respondents in Land Acquisition Dispute

Court Dismisses Fraud Allegation Against Lease Granted by Gram Panchayat, Affirming Finality of Earlier Compensation Award

In a significant judgment dated August 14, 2020, the Supreme Court of India dismissed appeals filed by the Union of India challenging the entitlement of M/s. K.C. Sharma & Co. and others to compensation for land acquired by the government in Delhi. The appeals arose from a dispute over whether the respondents were rightful lessees of the land and entitled to compensation under the Land Acquisition Act, 1894.

The controversy centered on 36 bighas 11 biswas of land belonging to Gaon Sabha Luhar Heri, which the government acquired under the Land Acquisition Act. The respondents claimed compensation on the ground that they had obtained the land on lease from the Gram Panchayat and had invested significantly in making the land cultivable by removing "shora" (saline deposits). A civil court, exercising jurisdiction under Sections 30 and 31 of the Land Acquisition Act, had apportioned 87% of the compensation to the respondents and 13% to the Gaon Sabha.

Subsequently, some villagers challenged this arrangement through a writ petition alleging collusion between the respondents and the ex-Pradhan (head) of the Panchayat, claiming that the lease was a fabrication. The Delhi High Court, however, did not conclusively find fraud and allowed the respondents to maintain their claim. The Gaon Sabha then filed a suit seeking to declare the earlier judgment obtained by the respondents as fraudulent. The trial court initially ruled in favor of the Gaon Sabha, but the High Court reversed this decision, holding that the lease was valid and that the respondents were rightful lessees entitled to compensation.

The Supreme Court, after hearing arguments from both sides, upheld the High Court's ruling. It emphasized that the earlier judgment and decree regarding compensation had attained finality and had not been appealed against, thereby binding the parties. The Court noted that the leasehold rights were created following approval by the Deputy Director of Panchayat, after a proper auction with multiple bidders. The respondents were the highest bidders and took possession accordingly, which was also reflected in the revenue records as they were entered as possessors and cultivators.

Rejecting the appellants’ contention that the respondents only had a license rather than a lease, the Court relied on Section 53A of the Transfer of Property Act, 1882, which protects possession of a person acting on a contract of lease even if a formal lease deed was not executed or registered. The Court further underscored that allegations of fraud must be pleaded with particularity and proved with cogent evidence; vague allegations without substantiation cannot set aside a final decree.

The judgment clarifies the legal position concerning leasehold rights in acquired land and reinforces the principle that final judicial decisions cannot be easily overturned on unsubstantiated claims of fraud. It also highlights the procedural safeguards in land acquisition compensation disputes under the Land Acquisition Act.

The civil appeals filed by the Union of India were accordingly dismissed without costs.

Statutory provisions

Land Acquisition Act, 1894 Sections 4(1), 6, 18, 30, 31; Transfer of Property Act, 1882 Section 53A; Code of Civil Procedure Order 1 Rule 10

Union of India v. M/s. K.C. Sharma & Co. (SC) : Law Finder Doc Id # 1736707