INDORE DEVELOPMENT AUTHORITY Vs. MANOHARLAL & ORS 2025

The question was whether the government’s deposit of compensation in the treasury may be considered payment to the landowner under Section 24(2) of the 2013 Land Acquisition Act, so preventing the proceedings under the 1894 Land Acquisition Act from terminating.

In a 2014 case involving the Pune Municipal Corporation [1], a bench of three judges ruled that if land owners refuse to accept compensation, they must deposit it in court. Section 24(2) states that merely depositing compensation in the treasury does not constitute payment. In other words, land acquisition actions under the 1894 Act would end.

In December 2017, a two-judge panel led by Justices Arun Mishra and Amitava Roy questioned the validity of this approach in the Indore Development Authority case [2] and referred it to a higher court.

Justice Arun Mishra led a three-judge panel that considered the reference. The three-judge panel in Pune Municipal Corporation ruled per incuriam, with a 2:1 majority. Justices Arun Mishra and A K Goel sided with the majority, while Justice Mohan M Shantanagoudar dissented, arguing that a three-judge bench cannot reverse a precedent established by a co-ordinate bench.

Another three-judge panel objected to Justice Arun Mishra’s decision in the Indore Development Authority case and delayed its implementation.
After this, a two-judge bench led by Justice Arun Mishra sent the subject to the CJI for further review by a larger court.

1. Whether non-deposit of compensation in Court under Section 31(2) of the Land Acquisition Act, 1894 result in a lapse of acquisition under Section 24(2) of the Land Acquisition Act, 2013?
2. Whether non-deposit of compensation would invite any consequences if the compensation has been tendered and refused under S.31(2) of the 1894 Act and S.24(2) of the 2013 Act?
3. Whether the word ‘or’ should be read in an injunctive or disjunctive manner in Section 24(2) of the LA Act, 2013?

• Appellant’s Contentions

• The appellant contended that the land acquisition procedures did not lapse under Section 24(2) of the LA Act, 2013 simply because the compensation sum had not been put in the landowner’s bank account or paid directly. They argued that placing the compensation in the government treasury or making it available to the landowner was adequate compliance.
• They claimed that possession of the land had been stolen, even though the landowner had not physically left the premises. Constructive possession, in which the government takes action, such as entering revenue records, should be sufficient to prevent lapses.
• The appellant underscored the necessity of the acquisition for public interests, as well as the fact that Section 24’s lapse provisions should not be used to reverse completed acquisitions retrospectively. [3]

• Respondent’s Contentions

• The respondents argued that under Section 24(2) of the LA Act, 2013 if compensation is not paid to the landowner or deposited in a court or authorized account, the acquisition automatically expires. They stressed that a simple deposit in the treasury does not meet the statutory criteria.
• They claimed that the government or acquiring authority had not taken actual, physical ownership of the land. Constructive possession was insufficient under the law.
• The respondents claimed that the LA Act,2013 was welfare legislation designed to provide equitable remuneration and preserve landowners’ rights. Provisions such as Section 24(2) should be read in favour of the landowner.
• They claimed that the acquisition procedure had expired since both requirements under Section 24(2), that is, non-payment of compensation and failure to take possession, were satisfied. [4]

Whether non-deposit of compensation in Court under Section 31(2) of the Land Acquisition Act, 1894 result in a lapse of acquisition under Section 24(2) of the Land Acquisition Act, 2013?

Section 24(1)(a) states that if an award is not issued by 1.1.2014, the start date of the Act of 2013, the proceedings would not expire. Compensation must be decided in accordance with the requirements of the Act of 2013. If the award was made during the five-year window period (excluding interim orders), proceedings will continue as per Section 24(1)(b) of the Act of 2013 under the Act of 1894, assuming it has not been repealed.

Section 24(2) allows for a deemed lapse of proceedings if authorities failed to take possession and pay compensation for five years or more before the Act of 2013 came into force. This applies to land acquisition proceedings that were pending with the relevant authority as of January 1, 2014. Interim court orders cannot be counted against the five-year timeframe.

Section 24(2) of the 2013 Act does not create a new legal action to challenge the legitimacy of land acquisition processes that have already been completed. Section 24 applies to pending proceedings as of the Act of 2013’s enforcement date, 1.1.2014. It does not resurrect old or time-barred claims, reopen completed actions, or allow landowners to challenge the legality of taking possession or depositing money in the treasury to invalidate acquisition.

Whether non-deposit of compensation would invite any consequences if the compensation has been tendered and refused under S.31(2) of the 1894 Act and S.24(2) of the 2013 Act?

If a person receives compensation under Section 31(1) of the Act of 1894, they cannot argue that the acquisition has expired under Section 24(2) owing to non-payment or non-deposit of compensation in court. The responsibility to pay is fulfilled by offering the sum under Section 31(1). Landowners who refused to accept compensation or sought higher compensation cannot argue that the acquisition procedures expired under Section 24(2) of the Act of 2013.

Whether the word ‘or’ should be read in an injunctive or disjunctive manner in Section 24(2) of the LA Act, 2013?

Section 24(2) of the 2013 Act states when ongoing land acquisition procedures under the LA Act may lapse. It specifically applies to actions under the LA Act in which an award was issued at least five years before the 2013 Act went into effect on January 1, 2014. Section 24(2) specifies two criteria that might result in a lapse: non-possession by the State or nonpayment to the landowner(s). The question before the Bench was whether both or merely one of these elements had to be satisfied in order for proceedings to lapse.

Assuming ordinary usage, the inclusion of ‘or’ in the rule implies that just one of the requirements must be satisfied for an acquisition to lapse. For example, if the State fails to pay the landowners, the proceedings will expire.

Justice Mishra supported his judgment by pointing out the contradictions that would result from the alternative view. He reasoned that if ‘or’ were declared to be disjunctive, absurdities would ensue. He used section 16 of the old LA Act as an example. Section 16 vests land in the State ‘free from any encumbrances’ when it makes an award under Section 11 of the LA Act. In effect, he ruled that once the State issues an award and takes possession, it becomes the ‘absolute owner of the property’. 

According to Justice Mishra, there is no mechanism in place to reverse the procedure and cancel the land acquisition. He further stated that neither the LA Act nor the 2013 Act need a payment as a prerequisite for acquiring ownership. He found that allowing processes to lapse after the State had acquired ownership due to nonpayment would violate the terms of the LA Act.

According to statutory interpretation rules, two negative conditions separated by a ‘or’ must be understood as conjunctive, i.e., ‘nor’/’and’. In light of this, the Court determined that the ‘or’ in Section 24(2) must be interpreted as ‘nor’/’and’. This suggests that if the award was issued 5 years or more prior to January 1, 2014, and neither actual possession nor compensation was received, the proceedings would expire. However, even if one of them was completed, the proceedings would be saved.

Ambiguity in the Act: Land acquisition procedures under the Land Acquisition Act of 1894 shall lapse if compensation is not paid to the proprietor or lodged in court, and possession is not seized within five years after the 2013 Act. The ambiguity lies in what constitutes ‘payment’ and what qualifies as ‘possession’.

Lack of clarity on the deposit of compensation: The Act does not specify where compensation should be placed if the landowner refuses to accept it or cannot be identified. Should it be put in the government treasury, specific accounts, or the court?
This lack of clarity sparked debate over whether the acquisition fails if the compensation is not physically delivered to the landowner.

Contradictory precedents: Prior to this decision, differing interpretations of Section 24(2) by different Supreme Court benches exacerbated matters:
In Pune Municipal Corporation vs. Harakchand Misirimal Solanki, the Court ruled that acquisition fails if compensation is not given to the proprietor or lodged in court.
In Indore Development Authority vs. Shailendra, a competing perspective was expressed that putting compensation in the treasury is sufficient.
These contradictions weakened the law’s predictability and uniformity.

Though this decision has resolved some critical interpretational issues, it may be viewed as an escape route for the government, as acquisition proceedings initiated under the 1894 Act can now be saved because the government may have simply tendered or offered compensation to the landowner.

REFERENCES

[1] Pune Municipal Corporation and Ors. v. Harakchand Misirimal Solanki and Ors. (2014) 3 SCC 183.

[2] Indore Development Authority and Ors. v. Shailendra (Dead) through LRs and Ors. (2018) 3 SCC 412.

[3] Indore Development Authority and Ors. v. Manoharlal and Ors. (2020) 2020 SCC OnLine SC 316.

[4] Ibid [3]

[5] Land Acquisition Rehabilitation and Resettlement Act, No. 30 of 2013, (2013)