Residents of Mumbai’s tony Peddar Road, and workers from a political party were locked in an unseemly scuffle at a recent public hearing over a flyover project. The residents claimed that “public purpose” sought to be served by the flyover was not commensurate with the disturbance to their comfort zone. The politicians on the other hand, asserted their right to have the flyover built on the ground that the locals’ opposition was hurting the interests of the rest of the city.
Meanwhile, in West Bengal farmers were reclaiming land that had not too long ago been acquired from them by force of law to construct private commercial establishments. Companies under the control of some residents of Peddar Road were up in arms against the terms on which the land was sought to be re-acquired from them.
These two contrasting scenes are but a small part of the larger theme. The flavour of the month is the evolution of law governing the State’s right to forcibly acquire private property. Last week, a constitutional bench of the Supreme Court upheld a Karnataka law, enabling the State to acquire the vast estate of an artistic couple to build a museum in their honour. Any private property can be acquired by the State for a “public purpose”, the court ruled, subject to payment of adequate compensation. Of course, the court reiterated that the property acquired should be utilized only towards the stated public purpose.
A draft law titled The National Land Acquisition and Rehabilitation & Resettlement Bill, 2011, was released by the central government introducing a new regime to effect such usurpation legitimately. The legal definition of “public purpose” will expressly include purposes that are “useful to the general public including land for companies, for which at least 80 per cent of the project affected people have given their consent through a prior informed process”.
Conferring powers on the State to acquire property from one set of private hands, only for private enjoyment by other private hands, is truly anti-enterprise and communist in character. State power to re-distribute privately-owned property on a discretionary basis is the essence of distributive justice that socialism boasts of. It is precisely such a regime that enables the well-connected and networked entrepreneur to profit at the expense of the small entrepreneur, killing capitalistic free competition.
The media has hailed the proposed law as a just one. But the fine print entails real grass-root-level entrepreneurs like our farmers and tribal people, for whom the land they live on is capital deployed for enterprise, being thrown out of their homes by the State, only to house a different section of society in such property, ostensibly serving a “public purpose”.
The same government whose policy places numerous hurdles in the path of a large shareholder in a listed company seeking to delist shares from stock exchanges (price discovery through reverse book building; consent of shareholders holding at least 90 per cent of the capital; and no legal ability to squeeze out insignificant minority interests) feels proud and progressive about proposing law to force 20 per cent of land owners out of their homes if 80 per cent of the “project affected people” (itself a plastic concept) agree to have their properties extracted to make way for other people’s homes. It is precisely such action that was held to be illegal when the Supreme Court upheld an Allahabad High Court’s order outlawing the acquisition of vast tracts of lands from farmers in Noida, initially for an industrial purpose, but eventually for real estate developers to build urban residential properties.
The theme of the State having an overriding interest in private property has been gaining increasing resonance in Indian business law and policy. For example, the gas dispute between the two factions of the erstwhile Reliance Group was determined on the premise that the State owned rights to the gas explored and produced. In Mumbai, state-owned land leased to private industry specifically to run textile mills, has found its way to real estate development – there is not even any pretension of a “public purpose” here.
In the United States, against the teeth of a Supreme Court judgement on the constitutional validity of such acquisitions, Republican President George Bush wrote an executive order prohibiting the State from making acquisitions for the purpose of advancing the economic interest of private parties. “Public purpose” is an unruly horse. Robbing Peter to pay Paul is the stuff that leads to civil war. The scuffles and catfights at Peddar Road are a small demonstrative sample.
(The author is a partner of JSA, Advocates & Solicitors. The views expressed herein are his own.) somasekhar@jsalaw.com
