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Eminent Domain or Eminent Thievery?

Eminent Domain or Eminent Thievery?

It appears that the courts did not look at the substantive issues behind the allegations that excess land was acquired for the Bangalore Mysore Infrastructure Corridor. The courts seem to have gone by the Karnataka government's assurance that only a minimum amount of land was given to the company. Bad governments need not act in public interest and may indeed abuse their "eminent domain" powers and aid and abet "eminent thievery".

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Eminent Domain or Eminent Thievery?

Bangalore Mysore Infrastructure Corridor

It appears that the courts did not look at the substantive issues behind the allegations that excess land was acquired for the Bangalore Mysore Infrastructure Corridor. The courts seem to have gone by the Karnataka government’s assurance that only a minimum amount of land was given to the company. Bad governments need not act in public interest and may indeed abuse their “eminent domain” powers and aid and abet “eminent thievery”.

V RANGANATHAN

T
he efficacy and ethics of the government using its eminent domain powers to acquire lands for mega private projects are progressively under challenge. Two recent examples of large tracts of land being transferred to the private sector are the Bangalore Mysore Infrastructure Corridor (BMIC) in Karnataka and the special economic zone (SEZ) in Haryana for Reliance Industries. Though in most of these cases the sale of private lands is effected at near market rates, the phenomenal increase in land prices in these areas – mostly because of the project – often leads to dissatisfied land owners feeling that they are forced to sell because of the government exercising its “eminent domain” powers. The BMIC project illustrates the limits of this problem where the landowners accused the government of being in cahoots with the project company, Nandi Infrastructure Corridor Enterprises (NICE), and turning over excess land to them. They complained that the excess lands given were near Bangalore where the prices were skyrocketing. The company did not require that much land, they believed, near Bangalore as they had to build only the road, and the townships were to be built only near Bidadi, which was quite far from where the land was acquired. In a bizarre turn of events, the state government, which was supporting NICE in the initial stages, reversed its stand and accused the company of perpetrating a fraud on them, and supported the claim of excess lands being given away. Both the claims – of fraud and excess land being given – were rejected by the apex court, and the government was asked to pay costs of Rs 5 lakh to the company. The apex court also asked the high court to initiate criminal proceedings against the chief secretary and another officer of the state government for not telling the whole truth and nothing but the truth, in their sworn affidavits.

Substantive IssuesSubstantive IssuesSubstantive IssuesSubstantive IssuesSubstantive Issues

However, it appears that the courts did not look at the substantive issues behind the allegations of whether the land given was excess or more specifically if unnecessary lands near Bangalore – where the prices had skyrocketed – had indeed been turned over to the company. The courts seem to have gone by the (earlier) assurance of the government that only a “minimum” amount of land was given to the company. In reality, bad governments need not act in public interest, and may indeed abuse their “eminent domain” powers, and aid and abet “eminent thievery”. Under those circumstances, the courts can rescue the public interest, but in this case, unfortunately they seem to have not taken that position. The case also raises the suspicion that the courts have blindfolded themselves to the facts on the ground, under the argument of “res judicata”. This means that if some issues are settled in the court once, the same issues cannot be reagitated. This principle was considered as applicable even to a public interest litigation. This is highly questionable, as we shall show later.

The BMIC project is based on the concept of internalising the external benefits of a project to make it financially and economically viable. Accordingly, the 111 km access – controlled expressway can avail of the profits generated by developing five townships along the route, corporate and commercial centres near Bidadi – some 21 km from the outer periphery of Bangalore from where the expressway would start – a heritage and an industrial centre near Ramanagaram and an eco-tourism centre near Srirangapatna. The project involves a land use of about 7,000 acres for the road and 13,000 acres for the township, consisting of government and private lands roughly in the same proportion. It is a build-own-operate-transfer (BOOT) project, with an investment of Rs 1,600 crore (at 1997 prices) with no requirement of investment from the government.

The memorandum of understanding (MoU) was signed between a three member consortium of Kalyani group (Indian) and VHB and SAB groups (USA) and the state of Karnataka on February 20, 1995. The governor of the state of Massachusetts, former prime minister H D Deve Gowda and the then chief minister of Karnataka were present at the time of signing of the MoU and they also appended their signatures to the document. The Kalyani group represented that it had the professional expertise, the financial resources and the vision to advance and complete the project. VHB represented that it will be the lead engineer and shall be responsible for all the planning, engineering, construction and management of the project. SAB represented that it will assist in providing engineering designs of utilities, infrastructure and communication systems as well as construction management. The members of the consortium divided the responsibility among themselves for implementing the project. NICE was formed by Kalyani and SAB to execute the project, and VHB and Kalyani formed another company, India International Infrastructure Engineers (IIIE), for providing construction activities. The consortium members transferred their rights to NICE through a consent and acknowledgement agreement (CAA) on September 9, 1996. In 1997, NICE submitted a framework agreement (FWA) to the government. This was approved by the cabinet in March 1997 and signed in April 1997.

Economic and Political Weekly June 30, 2006

The FWA came to be challenged in writ petition (PIL) 29221/1997 by one H T Somasekhar Reddy, a retired chief engineer “on all conceivable grounds” – that the FWA was not valid, was against public interest, and that excess lands were being given. It was strenuously opposed by the state government and NICE. The writ petition was dismissed by a division bench of the high court, with all questions being answered in favour of the respondents, viz, GoK and NICE. “It was held that the FWA was not arbitrarily entered into by the state government; was not opposed to public policy; not unconstitutional or illegal; not vitiated by mala fides; and that no rights of any individual or individuals had been illegally affected by the execution of the agreement. The court found that it could not exercise its power of judicial review to interfere with the FWA, which was in reality a policy choice of the government”.1 The judgment was challenged in the Supreme Court (in SLP (Civil) CC 1423/99) but was dismissed in limine on March 26, 1999. The judgment in Somashekar Reddy thus reached finality.

Excess LandExcess LandExcess LandExcess LandExcess Land

It is to be pointed out that though one of the main grounds of the challenge of the FWA by Somasekar Reddy was that land was being acquired far in excess of what was required for the project, and that it would illegally create huge profits for Nandi, the petition did not specifically prove how the land acquired was in excess. Even when it did, it stated – based on Reddy’s experience as an engineer – that a four-track highway with a width of 100 metres would require about 25 acres per km, which is just simple multiplication of length and breadth, and highlighted that the land sought and given for 111 km of the highway, viz, 6,999 acres, was two and a half times what was required. This was denied by the respondent, i e, the government, by saying that “he is not qualified to assess and evaluate the proposed concept of the project in view of the modern technique”. The government did not, however, say why land that was two and a half times the size of the road was required, not withstanding the side roads, and other infrastructure that go with the expressway. Of course, the land required for the townships, being more modern and complex, was never examined by the government and they relied fully on the private promoter. Later we will show how even the government appointed K C Reddy committee did not contest the land requirement for townships, and yet arrived at a politically palatable, but misleading conclusion that excess lands have been given.

Somashekar Reddy’s main contention was that this was in reality a real estate project, which was masquerading as a road project, and that the government was in fact doling out largesse to the company by undertaking the acquisition of land on its behalf. This is because, without calling for a competitive bidding, the procedure was arbitrary and therefore violated Article 14 of the Constitution, that is equality before law. However, the bench held that inviting tenders is not always necessary for the government, till it is proved that its actions are “unreasonable” or against public interest; the burden of proof resting with those who complain.2 The specific nature of this contract, which is BOOT, with no money being paid by the government to the contractor carries the implication that society is getting something for nothing, and this seems to have influenced both the government and the learned judges. The value of the precious resource, land, that the government is turning over to the private parties at pre-project “market” rates, using the exclusive power of “eminent domain”, seems to have been lost in the development rhetoric and the government’s bankruptcy. Thus Somashekar Reddy lost the case, because he lost credibility before the court as a politically interested busybody, who mixed good points, like excess land, with bad points like mala fides of the contract. However, the far greater damage done by him, though inadvertently, is that his case formed the basis for the judgment on the next set of PILs that challenged the project again, this time much more specifically, and were yet thrown out because of ‘res judicata’.

Between November 1997 when Somashekar Reddy’s writ petition was filed and March 1999 when it was dismissed in limine by the Supreme Court, the project was continuing with a government land acquiring authority, created for this purpose, the Karnataka Industrial Areas Development Board (KIADB). KIADB, notified several pieces of lands near Bangalore. Also, according to the WP filed by Madhuswamy and others, the then minister for industries, Deshpande denotified some lands that were put up to him selectively on the grounds that they fell outside the road alignment.3 Poor farmers’ lands were under notification where the rich and connected were able to get theirs denotified! It is in this context that a second batch of writ petitions with many landowners challenging the acquisition of their lands reached the high court in 2004. The single judge partly allowed the writ petitions and took the view that 60 per cent of the land to be acquired by the state, in so far as it related to the formation of roads, etc, was valid whereas the remaining 40 per cent meant for the development of townships, convention centres, etc, was invalid and the acquisition to that extent was quashed. The aggrieved parties filed the writ appeals before the division bench. At this stage, the state government was also on the same side as NICE.

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Economic and Political Weekly June 30, 2006

Along with these, a PIL (WP 45386/ 2004) by two MLAs and a social worker (J C Madhuswamy, Srirama Reddy and Munegowda), was also filed in the high court, in 2004, seven years after the high court had allowed the land acquisition to go ahead in Somashekar Reddy’s case. In this writ they had specifically brought out the following points:

  • (i) The KIADB exceeded its brief in notifying lands near Bangalore, and 50 to 60 km away from the proposed townships, thereby clearly identifying the excess lands and their nature, and how the “eminent domain” application was hurting land owners in view of the huge disparity between acquired price and market price. The value of the largesse passed on to NICE by notifying land in the urban areas of Bangalore was quantified at Rs 700 crore.
  • (ii) How influential people could selectively get out of “notification”.
  • (iii) How some of these lands were sold at enhanced market rates, even before the road or the townships came into being, clearly establishing the real estate rather than developmental nature of the transaction.

    However, they also imprudently and unsuccessfully argued that NICE was not the legal successor to the original consortium and hence alleged mala fides in the FWA.

    ReversalReversalReversalReversalReversal

    It was at this stage that the state government reversed its stand and also alleged fraud on the part of NICE. Acting on the allegations of Deve Gowda, that the project was being constructed by NICE for the purpose of running a real estate business instead of providing infrastructural facilities, the PWD minister, H D Revanna constituted a review committee. This was later termed as the expert committee, under the chairmanship of K C Reddy, that was to look into the allegations of excess lands being acquired, including those that had already been acquired and deemed excess. The high court clearly saw in this a political motive to stall the project, since even at this stage there was no evidence of fraud, as the government has stated. The formation of this expert committee was also in suppression of the empowered committee, headed by the chief secretary, as per the FWA, to monitor the execution of the project. Besides, Reddy’s appointment as the chairman of the expert committee did not have credibility with the court, since he was already a member of the high level committee (HLC), which had scrutinised the FWA on behalf of the government. Also, K C Reddy had come to the conclusion that excess lands had been given, even before those excess lands were identified, which task was relegated to the KIADB! One aspect which has not been noted by the court in this matter is that K C Reddy did not say that excess lands were given for the project as a whole. He merely said for stage one of the project, for which NICE had reached financial closure, lands given were in excess. In other words, he implied that lands meant to be given during stages two and three, were given in stage one itself. Thus, technically, he was playing for both sides, on the one hand essentially agreeing with NICE on the land requirement, and on the other saying “excess lands have been given” to suit the political master who appointed him, adopting the ‘aswathama hathah (kunjaraha)’ posture.

    The high court framed two questions to answer:4

  • (1) Whether the FWA entered into between GoK and NICE was a result of any fraud or misrepresentation as alleged by Madhuswamy and others and the state government?
  • (2) Whether any land in excess of what was required for the project had been acquired by the state government and whether it could raise such a plea?
  • The first question was answered in the negative. When asked about the specifics of the government’s contention that it was a victim of fraud, the advocate general did not give a categorical reply and the court directed the chief secretary to file the affidavit in support of the government’s claim. He contended in the affidavit that “the representation that the consortium of three companies has established NICEL is factually not true. Misrepresentation starts here…GoK is not a party to the CAA (which bestows legality and legitimacy to NICE). It has not signed the CAA”. The court found that this was a suppression of facts because NICE had in fact informed the government of the CAA and the governor of Karnataka, on behalf of the GoK, had signed it. The law department had opined that it was not necessary for the government to sign or ratify the CAA since it was going ahead with signing the FWA. The court had thus found that the GoK is “therefore stopped on the doctrine of acquiescence and waiver from challenging the validity of FWA”.

    As regards the question of excess lands, the high court strangely looked at the motive behind the state government and the PIL petitioner, rather than the merit of the question. For this, it relied on the allegation by NICE that “despite the fact that the land around Bangalore which has been acquired for the project and vests in the state government has been allowed to be sold by the original landowners in favour of some influential persons and that the state authorities have registered the sale deeds”. It went on to observe, “A few instances have been given by Nandi as it is asserted that the writ petition has been filed only to protect the interests of such influential persons. If that be so, the petitions of such busy bodies deserve to be thrown out at the threshold and in appropriate cases with exemplary costs.” Once the motives became suspect, the decision was simple. It said, “Once it is held that the FWA is valid and proper, the extent of land required for the project forms part thereof in terms of schedule I and findings in this regard having become final and conclusive, it is not open to the state government nor to J C Madhuswamy and others, and not even to this court to reopen those issues once again.” Thus it answered, “the second part of the second question in the negative, refraining from answering the first part of the second question, as that would mean deciding the contractual disputes between the parties, which is not the scope of the present proceedings”.

    Economic and Political Weekly June 30, 2006

    From a public policy point of view, one would have thought that the government would have brought in the relevant expertise to decide on how much of the land requested by the private sector was a legitimate need of the project. The government, both in its HLC and in the expert committee, at best had PWD engineers, who by their own admission are out of date for this kind of project, which involves new techniques. Unfortunately this lapse of the government has gone unnoticed and unchallenged in the entire process. The Supreme Court had an opportunity to look at the issue, but it also blindfolded itself by invoking res judicata.

    Somashekar Reddy merely asserted that excess lands were given without substantiating this, except in the most rudimentary manner. Madhuswamy identified the excess lands and showed why lands near Bangalore are not needed for the townships which will come up far away. The high court refrained from looking at this fact, and pronounced a verdict on this critical question by saying that was not its brief. KIADB specifically identified the excess lands but it lacked conviction before the Supreme Court, as this exercise was carried out after the high court’s judgment! Intriguingly the Supreme Court has said, “that the land was not in excess has been held by the division bench of the high court on two occasions and we agree with it”. Clearly in the second (Madhuswamy’s) case, the high court did not answer that question.

    The problem of applying ‘res judicata’, in PILs is that they, by their very nature, permit different parties to raise issues of public interest at different times. They may impinge on the same issues but with different levels of expertise. To close the door on subsequent petitions based on res judicata risks missing out on valuable insights brought in by subsequent petitioners. More worryingly, the provision may be abused by organisations who could instigate a false PIL by an incompetent first mover and make him fail, so that others cannot reopen the issue, due to ‘res judicata’. In complex projects like the BMIC, where the benefits are not easily quantified, and where the government gives away precious resources like land with uncertain quid pro quo for the public, courts must be proactive and deal with the substantive issues, by bringing in experts in the field, where necessary, instead of insulating themselves within the confines of “scope” and other technicalities. Courts should also understand that there can be serious agency problems with the government, as officers and politicians may many times not do things in the public interest. In such cases, courts are the only recourse to the common man and they should not belie the faith placed in them.

    lli

    Email: ranga@iimb.ernet.in

    NotesNotesNotesNotesNotes

    1 MANU/SC/2206/2006 state of Karnataka Anr vs All India Manufacturers Organisation and Ors in Supreme Court of India, Decided on April 20, 2006.

    2 MANU/KA/0026/2000 WP 29221 of 1997 H T Somashekar Reddy vs Government of Karnataka and another, High Court of Karnataka.

    3 See Para 40 of the Writ Petition 45386/2004 by J C Madhuswamy and others against the State of Karnataka and others.

    4 MANU/KA/0167/2005 WP Nos 45334, 45386 and 48981 of 2004, All India Manufacturers Organisation vs State of Karnataka and Ors, High Court of Karnataka.

    Economic and Political Weekly June 30, 2006

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