LAW OF LAND ACQUISITION

EARLIER LAW - The Land Acquisition Act, 1894

The Land Acquisition Act, 1894 was passed in pre independent era
Designed by the Britishers to serve their only purpose of taking-over land to serve their colonial
interests, the law is too narrow and lacks humanitarian touch and sense of justice that any modern law
should have.
The Land Acquisition Act, 1894 outlines the purposes for which land may be acquired, the procedure
for acquisition, and the payment of compensation for such acquisition.
Public Purpose: The act provides that land may be compulsorily acquired by the government for a public
purpose. Section 3(f) of the act defines public purpose to include the provision and planned
development of village sites, provision of land for a state owned or controlled corporation, residential
development for the poor and landless, people displaced by calamities, educational, housing, health or
slum clearance schemes and premises for public offices. Section 39 of the act provides that land may be
acquired for the use of companies for the above purposes, or if the work is likely to prove useful to the
public.
Procedure: The procedure for acquisition of land includes notification of land to be acquired (Section 4),
hearing of objections (Section 5A), final declaration of acquisition (Section 6) and payment of
compensation (Sections 23 and 24). All disputes are to be settled in civil courts (Section 18).
Compensation: Section 23(1) of the act further provides that compensation for land acquisitions must be
computed at the market value of the land acquired. In addition, it must include payments for any
damage sustained by the person interested as a result of the acquisition, for instance due to the
severing of land from other land, the drop in profits or earnings of the person, and reasonable expenses
for relocation if that becomes necessary as a result of the acquisition. Further, Section 23(2) provides
that a solatium of 30% of the market value of the land should be paid in addition to the compensation in
light of the compulsory nature of the acquisition. Finally, the value of any property such as buildings,
irrigation works, trees, etc, must be paid. Section 24 of the act however, expressly prohibits the
intended value of land from being taken into account for computing market value. That is, if agricultural
land is being acquired for commercial use, the compensation will be based on the prevailing market
price for agricultural land.
The working of the Land Acquisition Act, 1894 over the last hundred years has revealed four major
problems that have led to widespread public discontent.
First, the act only recognizes the rights and interests of land title holders. In doing so, it fails to take into
account the interests of those who while not holding title to the land are nevertheless dependent on it
for their livelihood. Interestingly, in 1958, the Bihar government had raised this issue before the Law

Commission during the commissions review of the 1894 Act. The commission noted that this was an
important question of policy that deserved careful consideration inasmuch as the loss suffered by the
person was a direct result of the acquisition of land.1 However, the commissions recommendation was
until recently not acted upon, and no amendments were made to the 1894 Act to broaden the definition
of persons interested.
Second, the 1894 Act contains only an inclusive definition of public purpose and courts have
consistently deferred to legislative determination of what constitutes a public purpose. In successive
cases, the Supreme Court has held that the expression public purpose was elastic and could only be
developed through a process of judicial inclusion and exclusion in keeping with the changes in time, the
state of society and its needs.2 Moreover, courts have held that acquisitions benefiting particular
individuals or entities could satisfy the requirement of public purpose so long as they were in
furtherance of a scheme of public benefit or utility.3
Consequently, even before 1978, when the right to property was a fundamental right, state acquisition
of land for private industry was routinely upheld as a valid public purpose. Over time, the list of public
purposes has been continually expanded to include acquisitions for SEZs, cooperative societies, private
recreational projects and residential development, all of which have been upheld by the Supreme Court.
Till date, the Supreme Court has never found a law unconstitutional for violating the requirement of
public purpose.
The third problem derives from the legal requirement that those deprived of their land and livelihood
must be paid a fair equivalent of the value of the land as compensation. Unlike their approach on public
purpose, the Supreme Court took the compensation requirement seriously, insisting in its early
decisions that the compensation payable in case of compulsory acquisitions be the market equivalent of
the value of the land. However, through a series of constitutional amendments, Parliament has
substantially ousted judicial review of the quantum of compensation payable in individual cases.
The land owner is entitled to the compensation determined on the basis of the market value of the land
on the date of preliminary notification no consideration of rising future values as a result of the
development project. It is determined by the Collector, and for any objections under Section-5 and
Section-9 of the Act, the Collector and Government act as the Quasi-Adjudicatory Body, and the suits to
a civil court are specifically barred. There is no provision for an independent judicial body to fix the
amount of compensation calculated and hear the objections.
No consideration of rehabilitation reconstructing the lives of displaced and affected people is clearly
the most glaring short-coming of the 1894 Act, which instead emphasizes cash compensation for loss of
land and that too without specifying any time limit. This has allowed considerable laxity to the officials
further annoying the already affected people. Even with some time limit, the larger issue of
rehabilitation would remain.
This has resulted in the payment of less than market value compensation in many cases.
The fourth problem relates to the procedure involved in land acquisition under the 1894 Act which has
been criticized both by the government for delays in acquisition, and by the people for their lack of

participation in the governments decision to take over their land, as well as delays involved in the
determination and payment of compensation.
A fifth problem arises because, as noted in the Tenth Law Commission Report, there exists wide
variation in the provisions for acquisition in various state laws, including on the definition of public
purpose, the relevant date for determination of the market value of the land, the principles for
determining compensation, and the appointment of tribunals to determine the compensation and
adjudicate disputes. This creates a situation whereby the central and state governments can apply
differential principles of compensation for acquisition of land situated within the same state depending
upon the object of acquisition.

PRESENT LAW- The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation
and Resettlement Act, 2013
The key features of the new law are:

Social Impact Assessment and Environmental Impact Assessment: For a private entity or a PPP
project, state has to conduct a social impact assessment (SIA) and an environmental impact
assessment (EIA), to identify the families who would be affected if land was acquired.
given massive impoverishment and unnecessary acquisition of extra land and forcible acquisition
without any options assessment.
Contrary to EIA the SIA report will be prepared by appropriate government in consultation with
the Panchayat, Municipality and Municipal corporation. A Public Hearing is also mandatory in the
affected areas to ascertain the views of the affected families and included in the SIA report, Sec
5. The Expert Group for appraisal of Social Impact Assessment Report and to decide upon the
nature of the public purpose, after consistent pressure, now has representatives of the
democratically elected local self government institutions and non-official social scientists, experts
etc Chapter II B, Sec 7.
This is an improvement from the provisions of the earlier act where there was no process or
provision for consulting or seeking consent of the people

The private entity seeking land must then get the consent of 80 per cent of the affected families
before it gets the government to acquire land for it. In the case of PPPs, the entity has to secure
consent of 70 per cent of affected families. The third condition for getting possession of land
acquired through state intervention is payment of compensation and fulfilling of R&R
requirements.

Compensation package: Minimum compensation package shall constitute of following:

Up to four times the market value in rural areas and twice the market value in urban areas; the
Act provides compensation to those dependent on the land for livelihood; where acquired land is
sold to a third party for a higher price, 40 per cent of the appreciated land value (or profit) will be
shared with the original owners. This would be exempt from tax and stamp duty
Value of assets attached to land or building as determined by collector;
Solatium, equal to 100% of total compensation;
The Company for whom land is being acquired may offer its shares upto 25% of the
Compensation amount. In case the project affected family wishes to avail of this offer, an

equivalent amount will be deducted from the land acquisition compensation package payable to
it.
o

Rehabilitation and Resettlement: The definition of affected family includes farm labourers, tenants,
sharecroppers and workers in the area for three years prior to acquisition. The compensation would be
Rs 5 lakh or a job, if available, to the affected family; subsistence allowance of Rs 3,000 a month for one
year; miscellaneous allowances of up to Rs 1.25 lakh for each family

o Multiple Checks and Balances: A comprehensive, participative and meaningful process (involving the
participation of local Panchayati Raj Institutions) has been put in place prior to the start of any acquisition
proceedings. Monitoring Committees at the National and State Level to ensure that R&R obligations are
met have also been established.
o Special Safeguards for Tribal Communities and other disadvantaged groups: No law can be acquired in
Scheduled Areas without the consent of the Gram Sabhas.The Law also ensures that all rights
guaranteed under such legislations as the Panchayat (Extension to Scheduled Areas) Act 1996 and the
Forest Rights Act 2006 are taken care of. It has special enhanced benefits (outlined in a dedicated
chapter) for those belonging to the Scheduled Castes and Scheduled Tribes.
o Safeguards against displacement: The law provides that no one shall be dispossessed until and unless all
payments are made AND alternative sites for the resettlement and rehabilitation have been prepared. The
Third Schedule even lists the infrastructural amenities that have to be provided to those that have been
displaced.
o Caps on Acquisition of Multi-Crop and Agricultural Land: To safeguard food security and to prevent
arbitrary acquisition, The Act directs States to impose limits on the area of land under agricultural
cultivation that can be acquired.
o Return of Unutilised Land: In case land remains unutilised after acquisition, the new Act empowers states
to return the land either to the owner or to the State Land Bank.
o Exemption from Income Tax and Stamp Duty: 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.
o Share in appreciated land value: Where acquired land is sold to a third party for a higher price then 40 per
cent of the appreciated land value (or profit) will be shared with the original owners.