By not resolving the definition of ‘public purpose,' the Land Acquisition Bill keeps the door open for misuse
It has taken more than 110 years for the government to draft a new Land Acquisition, Rehabilitation and Resettlement Bill. But despite mounting evidence of widespread misuse of government authority in taking over farm land and the increasing protests against the legal ambiguity that abets such exploitative practices, the revised legislation remains dubiously vague on these counts.
The most contentious issue in land acquisition is the definition of public purpose, and the Bill does not address this. Worse, the provisions of the new bill legitimise land acquisition for-profit private companies. In this context, the Parliamentary Standing Committee, which recently reviewed the Bill and stakeholders' views, was right in asking the government to tighten the public purpose definition.
The government's indifference to public concern at these issues becomes clear when you compare the clause in the Bill pertaining to land acquisition for private companies with the one in the existing archaic Land Acquisition Act 1894. Under Section 3.za (vii) of the Bill, “acquiring land for private companies for the production of goods for public or provision of public services,” would constitute legitimate public use. This dismal vagueness is no different from what is in the 1894 Act. Section 40 (1b) enables acquisition for companies for the purpose of “construction of some work and that such work is likely to prove useful to the public.”
To argue, as the Ministry of Rural Development did, that the compensation and the process of acquisition are more important than ‘who acquires' is simplistic, and overlooks the social and political reasoning that underpins the legislation. Unlike a voluntary property transaction where there is a wilful buyer and a wilful seller, when the government acquires land using state powers, the transaction is by its very nature forced, and there is only a wilful buyer. The political argument that would persuade — or when persuasion fails, compel — an unwilling seller to part with his or her property is the pre-eminence of societal good over individual rights, and the need to sacrifice private property rights for larger public gain. Acquiring land to lay roads or erect other infrastructure facilities can present a convincing case with respect to direct public use, but acquiring land for private commercial development does not.
State & commercial development
One of the most cited property acquisition cases, Kelo v. City of New London, is an instructive example of the pitfalls involved in the state acquiring land for private commercial development. The city of New London in the U.S., which was economically struggling, encouraged the multinational pharmaceutical company Pfizer to build a $300 million research facility in the neighbourhood of Fort Trumbull. It presented this project as the key to the region's economic rejuvenation. In 2000, the City Council decided to redevelop 90 acres around the Pfizer facility to promote the revitalisation of the area and to meet the demands of the company for “a new employee housing and overall redevelopment of the Fort Trumbull area.” The redevelopment proposal included the construction of a waterfront hotel, a conference centre, a marina for tourist and commercial vessels, and 80 high-end residences. The existing properties were to be acquired and handed over to a private economic redevelopment corporation for this purpose.
Susette Kelo and other residents, whose properties were earmarked for acquisition, challenged the public-use content of the project. In 2005, the U.S. Supreme Court, in a 5-4 verdict, ruled in favour of the City of New London and the residents were evicted. Public outcry followed, and as many as 43 States subsequently amended their legislation to limit the takeover of private property for commercial development.
The story did not end there. The Fort Turnbull redevelopment project failed to take off. In 2009, as its tax incentive period was coming to a close, Pfizer wound up and left the city. Even five years after the residents were evicted there was no construction at the site.
Closer home, the Supreme Court in 2011 scrapped the acquisition of 156 hectares in Greater Noida to build luxury flats. It sternly rejected the ‘pubic purpose' argument put forth in defence, and cautioned that taking land “from one side and [giving] it to the other” is a “development of one section of society only”, and “has to go” .
Even the National Advisory Council's Working Group on Land Acquisition, Resettlement and Rehabilitation, after deliberating on whether land can be acquired for private companies or not, decided against it, with two members against one.
Australia has an excellent land records system that keeps track of transactions and provides all valuation information. Fairly accurate values of land marked for acquisition can be obtained and the compensation amount payable can be computed easily. Despite this, States such as New South Wales, for good reason, place restrictions on land acquisition. While compulsory purchase of land for a variety of public purposes is allowed, forced takeover for resale is not. Whenever there has been a dispute, as in the case of R&R Fazzolari Pty Ltd v. Parramatta City Council (2009), the High Court of Australia has upheld the restrictions.
The United Progressive Alliance government at the Centre will do well to ask why even such developed countries seek to restrain forced acquisition for private commercial development. The interference of the New South Wales Parliament to amend the legislation in order to bypass such restrictions to favour private development, and the constitutional challenges it had thrown up, constitutes another story.
Taking the compensation route to justify acquisition for private purpose has other problems. The proposed Bill makes no distinction between land acquired for clear-cut public use, and land forcibly taken over for private enterprises. It proposes that the amount of compensation payable for all kinds of land acquisition should be the same. This is in contrast to what legal scholars such as Richard Epstein have stated. The amount of compensation payable must be proportionate to the degree of public interest. More compensation for acquisition involving a low degree of public interest is one of the legal positions. The proposed bill is oblivious to these settled legal positions.
Arbitrariness of compensation
At a more fundamental level, cash compensation always involves ‘a degree of arbitrariness', and seldom includes benefits that would come after acquisition. The concept of fair market value, as Thomas Merrill, a well-known legal expert on Eminent Domain, observed, “is essentially a fiction in the context of takings of property”. In countries such as India, where land records are dismally managed and property transactions are often undervalued, it is worse than fiction. Registered values are way off the market value, and post-acquisition benefits are hardly taken into account. Realising this, the proposed Bill recommends, though randomly, that the registered values of land identified for acquisition be increased twofold to arrive at the compensation amount. Rural properties were to get six times the maximum registered value, but it has now been reduced to four.
If commercial projects are held up because of property title issues, they can be addressed on a case-to-case basis. This is no excuse to blur the distinction between the private and the public purpose of land acquisition. On the other hand, what is needed is the ‘enhancement of public-use determinants and rigorous tests to validate them'.