Land acquired for public purposes cannot be returned to owner by beneficiary through private deal: Supreme Court

The Supreme Court, in a judgment on Thursday (March 20, 2025), held that it was a fraud played on the State’s power of eminent domain if land acquired by the government for public purposes is transferred back to the original owner by the beneficiary of the acquisition through a private agreement.

The verdict by a Bench of Chief Justice of India Sanjiv Khanna and Justice Sanjay Kumar dealt with a case in which the Delhi Agricultural Marketing Board agreed to transfer half of the total land acquired for establishing an agricultural market back to the landowner.

“When the state uses its sovereign power of eminent domain and acquires land for a public purpose of establishment of a grain market under the control of a statutory Board, such an exercise cannot be set at naught by the beneficiary of such acquisition by entering into a private agreement shortly after the acquisition,” the judgment authored by Justice Kumar said.

Justice Kumar said the agreement would reverse the usage of the power of eminent domain by the state.

The top court said the deal turned the acquisition law on its head. “Validating this dubious enterprise by a statutory beneficiary of a compulsory acquisition would be nothing short of permitting a fraud on the exercise of such sovereign power by the state,” the court noted.

The Government had acquired 33 acres of land under the Land Acquisition Act, 1894, for the establishment of a grain market in Narela, Delhi. The possession of the land was taken over by the beneficiary Board.

The events took a curious turn subsequently when the Board agreed to return half the acquired land for adequate compensation and on payment of 12% interest.