Supreme Court: Returning Acquired Land Privately to Original Owner is Illegal

The Hon’ble Supreme Court of India, in the case of Delhi Agricultural Marketing Board vs. Bhagwan Devi (Dead) Through LR. (2025 INSC 367), dated March 20, 2025, held that it was a fraud on the state’s power of eminent domain if land acquired by the government for public purposes was transferred back to the original owner by the beneficiary of the acquisition through a private agreement.

The government acquired 33 acres of land in Narela under the Land Acquisition Act, 1894, for establishing a grain market. Possession was taken and handed over to the Delhi Agricultural Marketing Board on September 22, 1986. Bhagwan Devi, claiming ownership of 6 bighas and 10 biswas, challenged the acquisition before the Delhi High Court. During the case, the Board privately agreed on September 30, 1988, to return half of the land (3 bighas, 5 biswas) in exchange for compensation and 12% interest. This agreement was executed on the Chairman’s last day in office, without government approval or a conveyance deed.

The Hon’ble Supreme Court observed that the agreement in question contravened the established principles of land acquisition law and constituted a fraud on the State’s sovereign power of eminent domain. The Court held that once land is acquired for a public purpose, it vests absolutely in the government and cannot be subsequently transferred back to the original owner through a private arrangement by the beneficiary of the acquisition. Such an act would amount to an impermissible circumvention of the legal framework governing compulsory acquisitions and undermine the sanctity of the acquisition process.

After the High Court disposed of the writ petition based on the agreement, Bhagwan Devi initiated arbitration, where the award favored her; the Board’s challenge failed before the High Court, leading to this Supreme Court appeal. The Hon’ble Supreme Court held that, in accordance with Section 16 of the Land Acquisition Act, 1894, once possession of the acquired land is taken, it vests absolutely in the government, free from all encumbrances. Furthermore, Section 48 of the Act stipulates that even the government lacks the authority to withdraw from an acquisition after possession has been taken. As no conveyance deed had been executed in favor of the Board, it did not possess any legal authority to transfer the acquired land.

The Court further held that the arbitral award was in contravention of public policy and observed that the High Court, while exercising its jurisdiction under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996, failed to address these fundamental legal issues. In terms of Section 34(2)(b) of the said Act, an arbitral award is liable to be set aside if it is in conflict with public policy. The Court, therefore, concluded that the agreement in question was in direct contravention of established legal principles governing compulsory land acquisition.

The Court also noted procedural irregularities in the agreement’s execution. It was drafted before Board approval, with stamp papers purchased in advance, and signed on the outgoing Chairman’s last day in office. The Supreme Court allowed the appeal and set aside the arbitral award and the High Court’s judgments, ruling that land acquired by the government cannot be privately transferred back.

This ruling reaffirms that land acquired under the State’s sovereign power for a public purpose cannot be privately transferred back by the beneficiary, as such actions violate public policy and the legal framework governing compulsory acquisitions. The Supreme Court’s decision upholds the sanctity of the land acquisition process and prevents its circumvention through unauthorized agreements.