Expression 'Transfer' Used Not Confined To Sale/Lease, Includes Development/Collaboration Agreements – SC Clarifies 2018 Judgment

"The expression 'transfer' used in the main judgment, especially in light of para 42.6, is not confined to sale, lease or other encumbrance. It includes development and/or collaboration agreements, as well as licenses issued (for development) during the suspect period, whether or not in favour of the developer."

The main judgment of the Court had, after duly considering the sequence of facts and developments which occurred after publication of the notification under Section 4 of the (now repealed) Land Acquisition Act, 1894 on 27.08.2004, read with the final decision of the State of Haryana dated 29.01.2010 to not proceed with the said acquisition, declared as mala fide and inoperative the decision dated 29.01.2010.

The Court's reasoning was that the State, in principle, had decided to withdraw from the acquisition after the notification under Section 4, which was followed by the declaration under Section 6 and the receipt of objections from the concerned lands owners etc., even when the matter was posted for publication of the award on 26.08.2007.

In the interim period, land owners, alarmed by the prospect of losing their holdings, were induced to sell or otherwise transfer their lands to colonizers / developers at significantly lower rates of compensation.

Most of such colonizers / developers had entered into collaboration agreements after the notification under Section 4, sought (and were granted) licenses by the Department of Town and Country Planning of the State of Haryana.

The Apex Court had found that upon an overall consideration of the materials (which included relevant official notings in government files, ministerial decisions and notifications), the state machinery was used to further private ends.

The Court held that such a decision to withdraw from acquisition was a fraud on power under the Acquisition Act. Therefore, the judgment invalidated all transfers effected from the date of publication of the notification under Section 4, to the date of publication of the State's decision to revoke the acquisition i.e., from 27.08.2004 to 29.01.2010.

The IAs were preferred by the HSIIDC and several colonizers and developers, transferees, license holders, associations of allottees of flats or commercial plots, consumers, etc.

Some of the applicants were represented by Senior Advocates PS Patwalia, Kiran Suri, Brijender Chahar, Pinaki Misra, Randeep Singh Rai before the High Court.

The issue which was dealt with by the Court was to define the nature of the term 'transfer' adverted to in para 42 of the main judgment.

The colonizers/developers argued before the Court that as long as the lands were transferred by the owners, mere grant of developmental rights or other associated rights by instruments such as builder development agreements, collaboration agreements, and other contracts would not amount to 'transfer' within the meaning of the main judgment.

While the stand of HSIIDC and the State was that entering into such development agreements or contracts was in fact a 'transfer' as it impeded the enjoyment of title by the owners. It was further submitted that such agreements led to issuance of licenses, which were the basis for ultimately deciding not to acquire such lands.

The Apex Court placed reliance on the various IA's filed before it, the terms of the collaboration agreements and various precedents, and observed –

"It is clear that the collaboration agreements formed the first element of a two-step process whereby the colonizers / developers (who might have been also land owners) having acquired lands, prior to the preliminary notification, went ahead and entered into commitments by executing collaboration agreements after the notification under Section 4, and even declaration under Section 6, with full knowledge. The consideration for parting with developmental rights was far higher than the market value of the lands which they would have been entitled to. These acts ultimately culminated with the decision not to acquire the lands."

Further, the Bench observed, "The second step – and the important one persuading the State not to acquire the lands - was the application for, and the grant of, development licenses. Uniformly, in all these cases, the applications were made prior to the scheduled date of publication of the award (26.08.2007). This is a significant and tell-tale factor because there was no way the applicants would have ordinarily known that an award would not be pronounced on the concerned date. In fact, the application clearly indicates foreknowledge that their lands would not be ultimately acquired. This is what may be characterized as the proverbial 'smoking gun' which establishes the complicity of these individuals and entities."'

The Bench further noted that in all most all the cases, the rights were parted for consideration which was far above the notified acquisition rates, in this context, the Court held –

"This observation applies in the case of the two companies – Frontier and Karma, who continued to be the land owners of the land. Such 'emptying out' of all important attributes that constitute rights and interest over the property cannot but be viewed as a 'transfer'. To hold otherwise would mean that after receiving substantial amounts – equal to many times over the existing market rates (that could ordinarily have been claimed by the landowner in respect of their holding in acquisition proceedings) – and entitling the developer to create third-party rights in respect of not a few but hundreds of people, nevertheless, the landowner could still hold out and claim their right to not part with the title. Such a conclusion would defy reason and commonsense and cannot be countenanced. In the circumstances, it is held that the collaboration agreements in all these cases which ultimately culminated in the grant of licenses would fall within the mischief of the term 'transfer' as envisioned in the main judgment, as it foreclosed the enjoyment and possession by the landowner, who willingly parted with such rights, for valuable consideration and acquiesced to irreversible changes on it."

Thus, the Court held that the expression 'transfer' used in the main judgment is not confined to sale, lease or other encumbrance. It includes development and/or collaboration agreements, as well as licenses issued (for development) during the suspect period, whether or not in favor of the developer and accordingly disposed of the IAs.