Bombay High Court Rules That Land Acquisition for Cooperative Sugar Factory Does Not Lapse Due to Delay in Section 6 Declaration as Court-Imposed Stay Extends Limitation; Partial State Funding Establishes Public Purpose Even If State’s Shareholding is Below 51%

Court’s Decision:

The Bombay High Court dismissed the petition challenging the acquisition of land for a cooperative sugar factory, ruling that partial funding by the State exchequer meets the requirement of public purpose under the Land Acquisition Act, 1894. The court rejected contentions that the acquisition lapsed due to a delay in issuing a Section 6 declaration, emphasizing that court-imposed stays must be excluded from limitation calculations. The court also held that State ownership exceeding 51% was not necessary to justify public purpose if the acquisition was partly funded by the government.

Facts of the Case:

1. The Government of Maharashtra issued a Section 4 Notification on May 22, 2013, expressing intent to acquire land for a project linked to the by-products of a cooperative sugar factory.
2. The last date of publication of the Section 4 Notification was May 31, 2013.
3. Before the acquisition process was completed, the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (New Act) came into force on January 1, 2014.
4. A Section 6 Declaration was subsequently issued on July 22, 2014, with the last date of its publication being November 24, 2014.
5. The Award under Section 11 was made on July 16, 2016.
6. The petitioners challenged the acquisition on multiple grounds, including:
   • Violation of the time limit under Section 6 of the Old Act (one-year deadline).
   • Lapsing under Section 25 of the New Act, which requires that awards be passed within one year of the Section 6 declaration.
   • The cooperative society was not a ‘corporation owned or controlled by the State’, making the acquisition invalid.
   • The acquisition did not serve a public purpose, amounting to fraud on the law.
7. The petitioners had obtained a court stay on dispossession on October 21, 2013, which was still in force at the time of the judgment.
8. The State and the cooperative society argued that:
   • The State’s shareholding exceeded 51%, justifying public purpose.
   • Court-imposed stays extended the permissible period for Section 6 declarations.
   • Even if the State’s shareholding was below 51%, the acquisition was valid due to partial State funding.

Issues Raised in the Case:

1. Did the acquisition lapse due to a delay in issuing the Section 6 declaration beyond the statutory one-year limit?
2. Was the cooperative sugar factory a ‘corporation owned or controlled by the State’ under Section 3(cc) of the Old Act?
3. Did the funding mechanism impact the legality of the acquisition?
4. Should the acquisition have been carried out under Part VII of the Old Act (which governs acquisitions for private companies)?

Petitioners’ Arguments:

1. The Acquisition Had Lapsed Due to Time Limit Violations:
   • The Section 6 declaration was issued after one year, violating Section 6(1) of the Old Act.
   • The Award under Section 11 was passed after more than one year, violating Section 25 of the New Act.
   • The petitioners relied on the Supreme Court’s decision in Executive Engineer, Gosikhurd Project Ambadi, Bhandara (2022), which held that acquisitions lapse if the award is not passed within one year under the New Act.
2. The Cooperative Society Was Not a Corporation Owned or Controlled by the State:
   • The State’s shareholding in the cooperative sugar factory fluctuated between 35% and 44.29%, which was below the 51% threshold required under Section 3(cc) of the Old Act.
   • Since the sugar factory was not majority-owned by the State, the acquisition did not qualify as a public purpose.
3. The Acquisition Was a Fraud on the Law:
   • The acquisition was for a private cooperative society, not a public purpose as required under Section 3(f) of the Old Act.
   • The State should have used Part VII of the Old Act, which applies when land is acquired for private entities.
   • The failure to use Part VII indicated that the acquisition was misused to benefit a private party.

Respondents’ Arguments (State and Cooperative Society):

1. The Acquisition Did Not Lapse:
   • The petitioners themselves had obtained a stay order from the High Court on dispossession on October 21, 2013, which remained in force.
   • Explanation 1 to Section 6(1) of the Old Act states that periods during which acquisition is stayed by a court are excluded.
   • Since the stay was in force, the limitation period had not expired.
2. The Cooperative Society Was Owned or Controlled by the State:
   • The State’s shareholding exceeded 51% at certain points, making it a corporation controlled by the State.
   • Under Section 3(f)(iv) of the Old Act, land acquisition for a State-controlled corporation qualifies as a public purpose.
3. Partial State Funding Justified the Acquisition:
   • Even if State shareholding was below 51%, public funding was involved.
   • Under Pratibha Nema v. State of M.P. (2003), even a nominal public contribution is sufficient to establish a public purpose.
   • The Section 6 declaration itself stated that the acquisition was funded in part by the State.

Analysis of the Law:

1. Lapsing of Acquisition Proceedings

• Executive Engineer, Gosikhurd Project Ambadi held that the one-year limit in Section 25 applies.
• However, Indore Development Authority (2020) ruled that court-imposed stays must be excluded from limitation calculations.
• Since the petitioners had obtained a stay, the limitation period had not expired.

2. Definition of a ‘Corporation Owned or Controlled by the State’

• Section 3(cc) of the Old Act defines a State-controlled corporation as one where the government holds at least 51% of shares.
• The court did not decide whether this requirement was met, as the acquisition was justified based on State funding alone.

3. Public Purpose and State Funding

• Pratibha Nema v. State of M.P. (2003) held that even a token contribution by the State validates acquisition as a public purpose.
• Pandit Jhandu Lal v. State of Punjab (1961) ruled that if the government contributes to land acquisition costs, the acquisition does not require Part VII procedures.

Court’s Reasoning:

1. The Acquisition Did Not Lapse:
   • The stay order obtained by the petitioners extended the limitation period, making the Section 6 declaration and Award valid.
2. The State’s Shareholding Argument Was Not Determinative:
   • Since the acquisition was partly funded by the State, it qualified as a public purpose even if the sugar factory was not State-controlled.
3. Acquisition Was Not a Fraud:
   • The State’s financial contribution made the acquisition valid.
   • The procedure followed was legally sound.

Conclusion:

The Bombay High Court dismissed the petition, ruling that:

• The acquisition had not lapsed, as the court-imposed stay must be excluded from limitation calculations.
• The acquisition was valid due to partial State funding, making it a public purpose.
• The petitioners failed to prove fraud on the law.

The stay on dispossession was extended for eight weeks to allow the petitioners to appeal to the Supreme Court.

Implications of the Judgment:

• Government-funded acquisitions can be upheld even if the acquiring entity is not fully State-owned.
• Court-imposed stays will be excluded from limitation calculations.
• The judgment strengthens the government’s ability to acquire land for projects with partial public funding.

This decision reinforces the legal principle that even partial State involvement can justify land acquisition under ‘public purpose’ provisions.

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