India: India’s Controversial Land Acquisition Laws

Last Updated: 2 April 2015
Article by PSA

Introduction

On March 10, 2015, the controversial amendments to the land acquisition law were finally passed by the Lok Sabha1 after facing severe criticism both from the opposition parties as well as from the government's own allies. Once the amendment bill - Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement (Amendment) Bill, 2015 ("2015 Law") - becomes an act2, it will become easier for the government to acquire private land for public purposes and companies. India has had an archaic land acquisition law – the Land Acquisition Act, 1894 ("1894 Act") which was replaced in 2013 by The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 ("2013 Act"). The 2013 Act was criticized as being anti-industry – it was too rigorous which made land acquisition process difficult and long-winding, thereby reducing the availability of land for industry.

The scope of this newsletter is comparing the old land acquisition law (1894 Act) with the new (2013 Act) by highlighting their key features and also to look at the changes being brought about now by the 2015 Law.

1. The 1894 Act

The 1894 Act was enacted to enable compulsory acquisition of privately owned land by government for public purposes as well as for companies. The law suffered from various shortcomings.

Firstly, it was undemocratic. Although it provided for a procedure that involved issuance of public notice and holding of inquiry, practically speaking, these were mere formalities as private interest of landowners always had to yield to the declared public purpose such as building of road, railway line, school, industrial estate, etc. Once the acquiring authority had formed the intention to acquire a particular piece of land, it could carry out the acquisition process regardless of how the landowner was affected. Acquisition was not dependent on land owner's consent at all. Although the 1894 Act provided for a hearing, it was not a negotiation. Moreover, in cases of urgency, the land acquisition authority enjoyed special powers.3 The provision enabled bypassing of the normal procedure in cases of urgency, not all of which were defined. As a result, a lot of acquisitions under the 1894 Act invoked the urgency clause. This resulted in the complete dispossession of land without even following the processes listed under the Act. Secondly, payment for the land acquired used to be made as per the prevailing circle rates4 which were notorious for being outdated and, hence, not even remotely indicative of the actual rates prevailing in the area. As a result, the compensation given to landowners used to be substantially less than the actual market value of the land. Thirdly, there were absolutely no provisions in the law regarding the resettlement and rehabilitation of those displaced by the acquisition. A farmer losing his agricultural land also lost his means to livelihood but the old law did not address such issues. Finally, a lot of acquisitions, especially those done in recent years, ended up in litigation, usually after being challenged on the ground that the compensation awarded was inadequate. This resulted in stalling of legitimate infrastructure projects.

The 1894 Act and the manner in which it was being used by acquiring authorities had been receiving widespread criticism, including from the judiciary. In a 2011 case5, the Supreme Court observed that "......the provisions contained in the Act, of late, have been felt by all concerned, do not adequately protect the interest of the land owners/persons interested in the land. The Act does not provide for rehabilitation of persons displaced from their land although by such compulsory acquisition, their livelihood gets affected ...To say the least, the Act has become outdated and needs to be replaced at the earliest by fair, reasonable and rational enactment in tune with the constitutional provisions, particularly, Article 300A of the Constitution. We expect the law making process for a comprehensive enactment with regard to acquisition of land being completed without any unnecessary delay."

2. The 2013 Act

Although the 1894 Act was enacted by a colonial government, it was adopted unchanged by the government of independent India in 1947. It did not meet the evolving requirements and gradually, the injustices caused by it began to generate resistance in the society, causing abandonment of several projects, including the Tata Motors' small car project at Singur. Therefore, new land acquisition law was drafted, circulated, discussed, tweaked and finally became an act of Parliament in 2013.

The 2013 Act marked a paradigm shift in the land acquisition process and contains many provisions to protect the interests of not only the land owners but also landless project affected persons such as farm labour and slum dwellers. Under the new law, in cases where PPP projects are involved or acquisition is taking place for private companies, consent of 70% and 80% respectively of the landowners is required. This ensures that no forcible acquisition can take place. Given the inaccurate nature of circle rates, the law provides for payment of compensation up to four times the market value in rural areas and up to twice the market value in urban areas. This ensures fairer payment to the landowners. The new law links land acquisition with the accompanying obligation for Resettlement and Rehabilitation ("R&R") of all project affected persons, including the landless people. The law contains elaborate processes and entitlements for R&R. It outlines the benefits (such as land for land, housing, employment and annuities) that shall accrue in addition to the one-time cash payments. The new law even has retrospective application in certain cases. It applies retrospectively to land acquisitions under the 1894 Act, where no land acquisition award has been made. Also in cases where the land was acquired over five years ago but no compensation has been paid or no possession has been taken, the land acquisition process must be started afresh in accordance with the provisions of the 2013 Act. In case land remains unutilized after acquisition, the 2013 Act empowers states to return the land either to the owner or to the state land bank. The law provides that no income tax shall be levied and no stamp duty shall be charged on any amount that accrues to an individual as a result of the provisions of the new law. In cases where the acquired land is sold to a third party for a higher price, 40% of the appreciated land value (or profit) is required to be shared with the original owners. In cases where the land is acquired for urbanization, 20% of the developed land has to be reserved and offered to the landowners, in proportion to the area of their land acquired and at a price equal to the cost of acquisition, plus the cost of development. All affected families are entitled to a house, provided they have been residing in the area for five years or more and have been displaced. If they choose not to accept the house, they are offered a one-time financial grant in lieu of the same. Finally, under the new law, R&R provisions are applicable even to acquisitions by private parties, subject to size thresholds to be determined by state governments. If a private investor buys land directly from farmers and if the size of acquisition exceeds the set threshold, the private purchaser must also bear the R&R costs.

Predictably, the industry did not welcome the new law. According to CII's estimates, the new law was likely to increase land acquisition costs by up to 3.5 times, severely affecting the viability of industrial projects across the board and eroding the competitiveness of the Indian manufacturing sector.

3. The latest amendment: 2015 Law

The 2015 Law has tried to address industry concerns by reducing the rigour of some of the provisions of the 2013 Act. It does away with the social impact assessment and consent requirement, in cases where the land is being acquired for the purposes of five specified sectors, namely: (i) national security and defence, (ii) rural infrastructure including electrification, (iii) industrial corridors, (iv) affordable housing and housing for the poor and (v) infrastructure and social infrastructure projects, including PPP projects where ownership of land continues to be vested with the government. These five categories are quite wide in scope and will cover a lot of projects. Moreover, as long as the land acquisition is for the aforesaid five purposes, there will be no cap on the area of multi-crop fertile agricultural land that can be acquired. The amendment replaces the word "private company" wherever appearing in the 2013 Act, with the word "private entity", thereby enabling acquisition of land for and by other types of privately controlled entities such as proprietorship concerns, partnerships, societies, trusts, etc. It enables acquisition of land for private hospitals and private educational institutions also which was not allowed earlier. Under the 2013 Act, if the acquired land remained unutilised for a period of five years from the date of taking over the possession, the land was to be returned to the landowners. However, under the 2015 Law, if the period specified for setting up of any project exceeds five years, then such period (and not the five year period) is to be taken into account; also there is no cap on what such period can be.

Conclusion

Due to stiff opposition, including from some of the government's own allies, the 2015 Law had to be diluted by removing some of the amendments. Thus, social infrastructure has been removed as an exempted category as also private hospitals and private educational institutions. For industrial corridors, land can now be acquired only up to 1km on both sides of the designated railway line or road. Compulsory employment is required to be given to at least one member of the affected family of a farm labourer. It remains to be seen what further amendments will be made by the Rajya Sabha which is yet to pass it. Business organizations planning to set up projects requiring substantial land have no option but to face the reality of higher acquisition costs, given the increasing pressure on land caused by ever growing population and rapid urbanization in the country.

Footnotes

1 This is the House of People, the lower house of the Indian Parliament.

2 The bill needs to be passed by both the houses of Parliament and then receive the President's assent.

3 Under Section 17 of the 1894 Act.

4 The official area-wise rates of land determined by the government.

5 Ramji Veerji Patel and Ors. Vs. Revenue Divisional Officer and Ors., MANU/SC/1288/2011.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Singh & Associates
ZEUS Law Associates
Singh & Associates
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Singh & Associates
ZEUS Law Associates
Singh & Associates
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions