In a landmark judgment delivered on March 20, 2025, the Supreme Court of India ruled that land acquired by the government through its sovereign power of eminent domain for public purposes cannot be transferred back to the original owner by the beneficiary of the acquisition through private agreements. The ruling emphasized that such transfers would constitute a fraud on the state's power.

A bench comprising Chief Justice Sanjiv Khanna and Justice Sanjay Kumar delivered the judgment in a case involving the Delhi Agricultural Marketing Board ("Board"). The Board had agreed to transfer half of the total land acquired for establishing an agricultural market back to the landowner. However, the Supreme Court nullified this agreement, holding that once land is acquired and vested in the beneficiary, it cannot be privately returned to the original owner.

"When the State uses its sovereign power of eminent domain and acquires land for a public purpose, such an exercise cannot be undone by the beneficiary through private agreements. Validating such actions would amount to fraud on the exercise of sovereign power by the State." — Supreme Court

Read Also:- Supreme Court Rules Magistrate Cannot Direct Police to Add Accused in Charge Sheet, Must Issue Summons

Case Background

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 land was handed over to the Delhi Agricultural Marketing Board. The original landowner, Bhagwan Devi, challenged the acquisition in the Delhi High Court, which led to an out-of-court settlement wherein the Board agreed to transfer half the land back to her in exchange for proportional compensation and interest.

The agreement was executed just a day before the tenure of the then-chairman of the Board ended. Later, realizing that the agreement violated public policy, the Board attempted to recall it, but the High Court allowed Bhagwan Devi to pursue legal remedies.

The case took multiple legal turns:

• The landowner initiated arbitration proceedings, where the arbitrator ruled in her favor, directing the Board to execute a conveyance deed.
• The Board challenged the arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996, but both the Single Judge and Division Bench of the Delhi High Court upheld the award.
• Finally, the Supreme Court was approached to resolve the dispute.

Read Also:- Supreme Court Strikes Down Mandatory Arrest Condition in Bail Order

Setting aside the previous decisions, the Supreme Court ruled that the Board had no authority to execute the conveyance in the landowner's favor, as the Board itself had no conveyance deed from the government. Without absolute ownership, the Board could not legally transfer any part of the land.

"No document was ever issued by the Government actually transferring the subject land to the Board, whereby it could claim absolute rights over it." — Supreme Court

The Court also referenced Section 48 of the Land Acquisition Act, 1894, which states that the government can withdraw from an acquisition only if possession has not been taken. Since the possession had already been vested with the Board in 1986, the government itself could not revoke the acquisition, making the private agreement illegal.

Additionally, the Court criticized the High Court for failing to address critical public policy issues while reviewing the arbitral award under Sections 34 and 37 of the Arbitration Act.

"Neither the Court exercising jurisdiction under Section 34 nor the Court exercising appellate power under Section 37 dealt with these crucial issues. Section 34(2)(b) of the Act of 1996 categorically provides that an Arbitral Award may be set aside if it conflicts with the public policy of India." — Supreme Court

Read Also:- Supreme Court: Unauthorized High Court Benches Cannot Assume Jurisdiction

Case Title: Delhi Agricultural Marketing Board, through its Chairman Versus Bhagwan Devi (Dead), through her LR

Appearance:

For Appellant(s) Ms. Rachana Srivastava, Sr. Adv. Mr. Brij Bhushan, AOR Ms. Monika, Adv.

For Respondent(s) Mr. Swastik Solanki, Adv. Mr. Gaichangpou Gangmei, AOR Mr. Arjun D. Singh, Adv. Ms. Nisha Pandey, Adv. Mr. Maitreya Mahaley, Adv. Mr. Yimyanger Longkumer, Adv. Mr. J. Prasad, Adv. Mr. Atul Kumar, AOR Ms. Sweety Singh, Adv. Ms. Archana Kumari, Adv. Mr. Rahul Pandey, Adv. Mr. Harsh Kumar, Adv. Mr. Himanshu Raj, Adv. Mr. Sudipta Singha Roy, Adv. Ms. Manika Tripathy, AOR Mr. Kanhaiya Priyadarshi, AOR