Full Judgment Text
Non-reportable
2025 INSC 367
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 10757 OF 2017
Delhi Agricultural Marketing Board,
through its Chairman …..... Appellant
Versus
Bhagwan Devi (Dead),
through her LR. ..…... Respondent
J U D G M E N T
SANJAY KUMAR, J
1. Turning the law of land acquisition on its head, the
astonishing events that this appeal is founded on need to be narrated in
some detail.
2. An extent of 33 acres of land abutting the Narela-Bawana
Road was acquired by the Government to enable the Delhi Agricultural
Marketing Board (hereinafter, ‘the Board’) to shift and establish its grain
market in Narela. Notification under Section 4(1) of the Land Acquisition
Act, 1894 (for brevity, ‘the Act of 1894’), was issued on 30.10.1963.
Declaration under Section 6 of the Act of 1894 was issued on
10.01.1969 and the Award, determining the compensation, was made on
Signature Not Verified
19.09.1986. The acquired land included an extent of 6 bighas and 10
Digitally signed by
Deepak Guglani
Date: 2025.03.20
11:59:56 IST
Reason:
biswas situated in Khasra Nos. 296, 298 and 303 of Village Mamoorpur.
1
Bhagwan Devi claimed ownership over this smaller extent under
registered sale deeds of the years 1959 and 1971. Possession of the
acquired land was taken and handed over on 22.09.1986 to the
Agricultural Produce Marketing Committee, Narela, under the control of
the Board. This ostensibly included the extent of 6 bighas and 10 biswas
claimed by Bhagwan Devi. She, then, filed W.P. No. 149 of 1987 before
the Delhi High Court challenging the acquisition of her land.
3. It is at this stage that the story took a curious turn. The Board
resolved to settle the matter out of Court with Bhagwan Devi by
releasing and returning to her half of the acquired extent claimed by her
and retaining the remaining half, i.e., 3 bighas and 5 biswas. The
agreement in this regard was executed on 30.09.1988 by the Board,
through its then Chairman, with Bhagwan Devi. This agreement stated
that Bhagwan Devi would claim compensation as per the Award dated
19.09.1986 from the Land Acquisition Collector and would have all the
rights and remedies provided to her under the Act of 1894. The
agreement further recorded that, with the prior consent of the Land
Acquisition Collector, the Board, which had become the absolute owner
of the acquired land that was mutated in its favour in the revenue
records, would execute a proper conveyance deed in respect of the
portion of land proposed to be returned to her thereunder, for valuable
consideration. The consideration to be paid by Bhagwan Devi was
2
quantified as the proportionate compensation for half the land, as was
granted to her under the Award dated 19.09.1986, along with interest @
12 per cent per annum from the date of deposit of the compensation
amount by the Board with the Land Acquisition Collector till the date of
actual payment by Bhagwan Devi to the Board.
4. Clause (k) of the agreement provided that any dispute arising
between the parties touching upon the effect and meaning of the
agreement should be referred to the Chairman of the Board, whose
decision thereon would be final and binding upon the parties. This
agreement is stated to have been executed on behalf of the Board by its
then Chairman, just one day prior to his tenure coming to an end.
Though it is asserted that this action of the then Chairman was based on
the Minutes of the Board meeting held on 29.09.1988, there is no
mention of the same in the body of the agreement.
5. In any event, Writ Petition No. 149 of 1987 was disposed of
on 05.10.1988 in the light of this agreement. The Board seems to have
then realized that the land acquired for its benefit could not be released
in this manner and the issue was reconsidered in the Board’s meeting
held on 22.11.1988. The Minutes of this meeting recorded that, upon
enquiry, the authorities had informed the Board that though possession
of the acquired land was handed over to the Board, the land still vested
in the Government as no conveyance deed had been executed by the
3
Government in favour of the Board. The Board, therefore, opined that it
was necessary to review the whole matter. This was brought to the
notice of the Delhi High Court by filing an application to recall the order
dated 05.10.1988 passed in W.P. No. 149 of 1987. Bhagwan Devi had
also filed applications seeking implementation of the agreement dated
30.09.1988. The applications were taken up together and disposed of by
the Delhi High Court on 06.08.2002. By the said order, the High Court
left it open to Bhagwan Devi to avail appropriate remedies in accordance
with law and permitted the Board to raise all such objections as were
available to it, including the one mentioned in its application.
6. The turn of events then became ‘curiouser and curiouser’, to
put it in the words of Lewis Carroll’s Alice. Having slept over the matter
for two years, by way of notice dated 30.09.2004, Bhagwan Devi sought
‘arbitration’ under clause (k) of the agreement dated 30.09.1988! She
then filed an application, in Arb. P. No. 278 of 2004, seeking appointment
of an arbitrator. The same was allowed by the Delhi High Court on
17.05.2006 and a retired Judge of the Delhi High Court was appointed.
The Board contended before the Arbitrator that the agreement dated
30.09.1988 was void ab initio and could not be implemented as the land
acquisition authorities were not party to it and the acquired land could
not be returned without their consent. It also pointed out that the
agreement was brought into existence with undue haste, inasmuch as
4
the stamp papers therefor were purchased on 26.09.1988; the
agreement was drafted on 27.09.1988; the matter was put up before the
Board in its meeting held on 29.09.1988; and without confirmation of the
Minutes of the said meeting, the then Chairman signed the agreement
on 30.09.1988, which happened to be his last day in office.
7. However, the learned Arbitrator passed Award dated
10.07.2007 in favour of Bhagwan Devi, holding that the Board was
competent to enter into the agreement dated 30.09.1988 and return 3
bighas and 5 biswas of land to her. He accordingly directed the Board to
comply with the said agreement by performing its obligations thereunder
and execute a conveyance deed in favour of Bhagwan Devi. In turn,
Bhagwan Devi was also directed to perform her part of the agreement.
Aggrieved by the Award dated 10.07.2007, the Board filed a
8.
petition, vide OMP No. 561 of 2007, under Section 34 of the Arbitration
and Conciliation Act, 1996 (for brevity, ‘the Act of 1996’), before the Delhi
High Court. One of the grounds urged by the Board was that the Award
was against public policy. However, by order dated 01.07.2013, a
learned Judge of the Delhi High Court dismissed the petition, upholding
the Award in its entirety. Aggrieved thereby, the Board preferred an
appeal under Section 37 of the Act of 1996 in FAO (OS) No. 436 of
2013. The appeal also failed as a Division Bench of the Delhi High Court
dismissed it on 27.09.2013.
5
9. It is against the dismissal of the above appeal that the Board
filed SLP (C) No. 9491 of 2014, from which the present appeal
originates. By order dated 28.03.2014, this Court directed status quo
obtaining on that day to be maintained. Bhagwan Devi died on
13.01.2015 and her son was brought on record as her legal
representative. While so, an intervention application in IA No. 36403 of
2021 was filed by one Meena Sehrawat along with her sons, Pankaj and
Kunal. They put up a rival title over the subject land, claiming to be the
legal heirs of late Sanjay Sehrawat, the grandson of Bhagwan Devi’s
husband, late Kripa Ram, through his first wife. Be that as it may.
10. Initially, the Bombay Agricultural Produce Markets Act, 1939
(for brevity, ‘the Act of 1939’), was in force in Delhi. As per Section 16
thereof, if the Government was of the opinion that any land was needed
for the purposes of that Act, it could proceed to acquire it under the
provisions of the Act of 1894 and when such land vested in the
Government, it was to be transferred by the Government to the Market
Committee, on payment by the said Market Committee of the
compensation awarded and of all other charges incurred on account of
the acquisition, and on such transfer, the land would vest in that Market
Committee. Notably, this was the legal regime holding the field when the
notification and declaration were issued, in 1963 and 1969 respectively,
6
for acquisition of the 33 acres of land, which included the subject extent
of 6 bighas and 10 biswas.
11. However, when the agreement dated 30.09.1988 was
executed, the Delhi Agricultural Produce Marketing (Regulation) Act,
1976 (for brevity, ‘the Act of 1976’), was the extant legislation as the Act
of 1939 stood repealed thereby. The Board was constituted under
Section 5 of the Act of 1976 and in terms of Section 5(3) thereof, it was
to be a body corporate, having perpetual succession with power, subject
to the provisions of the Act of 1976, to acquire and hold property.
12. Thereafter, the present Delhi Agricultural Produce Marketing
(Regulation) Act, 1998 (for brevity, ‘the Act of 1998’), replaced the Act of
1976. It contains similar provisions in Section 6 thereof, which states that
the Board, constituted under Section 5 thereof, shall be a body corporate
and a local authority, having perpetual succession with power, subject to
the provisions of the said Act, to acquire, hold and dispose of property.
Section 24(1) thereof deals with the acquisition of land for markets and
states that when any land is required for the purposes of the Act of 1998
and the Board is unable to acquire the same by agreement, such land
may, at the request of the Board, be acquired under the provisions of the
Act of 1894 and on payment of the compensation awarded under the Act
of 1894 by the Board and all other charges incurred in connection with
such acquisition, the land shall vest in the Board. The proviso to Section
7
24(1), however, states that once a proposal has been made by the
Board, it shall not be withdrawn by it except for reasons recorded by it
and approved by the Lieutenant Governor. Section 24(2) of the Act of
1998 is of relevance and it reads as under:
‘(2) - The Board shall not, without the previous sanction of the
Lieutenant Governor, transfer any land which has been acquired
for the Board or Marketing Committee under sub-Section (1) or
vest in it or use such land for a purpose other than the purpose
for which it has been acquired, or is used, as the case may be.’
In effect, the power of the Board to acquire property, be it by
private negotiation or by compulsory acquisition through the aegis of the
Government, always stood protected. Such acquisition of property,
however, has to be in accordance with law, i.e., by way of a document of
conveyance. Further, as matters now stand, divesting of title in or a
different usage of the property compulsorily acquired for the Board is not
within its sole discretion.
13. In the case on hand, it is an admitted fact that the Award
determining compensation was passed on 19.09.1986 and possession
of the land was taken and handed over to the Board on 22.09.1986.
Section 16 of the Act of 1894 puts it beyond doubt that, upon possession
being taking over on 22.09.1986, the acquired land vested absolutely in
the Government free from all encumbrances. Significantly, the power of
withdrawal from an acquisition, under Section 48 of the Act 1894, can be
8
exercised by the Government only in respect of an acquisition where
possession of the land has not been taken. Therefore, it was not open
even to the Government to withdraw from the acquisition of the subject
land after possession was taken over on 22.09.1986, evidenced by
proper documentation.
14. In such a situation, the question that arises is whether the
Board, for whose benefit the land was acquired, could have achieved the
equivalent of such withdrawal by entering into an agreement with
Bhagwan Devi for returning part of the acquired land. Further, the
question would also arise whether the Board could exercise such power
when there was no document of conveyance in its favour in respect of
this land. The statutory scheme of the laws applicable to the Board at
different points of time, set out supra , speaks to the contrary as it
manifests that there must be a document of conveyance for the Board to
acquire and hold such land. Admittedly, no such document was ever
issued by the Government actually transferring the subject land to the
Board, whereby it could claim absolute rights over it.
15. The Board had raised these issues before the learned
Arbitrator, apart from claiming that the agreement dated 30.09.1988 was
contrary to public policy, but the Award dated 10.07.2007 came to be
passed holding against the Board. Neither the Court exercising
jurisdiction under Section 34 nor the Court exercising appellate power
9
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 the Court finds that it is in conflict with the public policy of India.
Explanation (1) thereto clarifies that an Award would be in conflict with
the public policy of India if it is in contravention of the fundamental policy
of Indian law or it is in conflict with the most basic notions of morality or
justice.
16. When the State uses its sovereign power of eminent domain
and acquires land for a public purpose, as in the case on hand, i.e., for
establishment of a grain market under the control of a statutory Board,
such an exercise cannot be set at naught by the beneficiary of such
acquisition, viz. , the statutory Board, by entering into a private
agreement shortly after the acquisition so as to reverse the usage of the
power of eminent domain by the State. Validating this dubious enterprise
by a statutory beneficiary of a compulsory acquisition would be nothing
short of permitting a fraud on the exercise of such sovereign power by
the State. Viewed thus, the agreement dated 30.09.1988 was clearly in
contravention of the fundamental policy of Indian law and the Arbitral
Award dated 10.07.2007, upholding the said agreement, was equally so.
17. Further, the fact that the preparation of the agreement dated
30.09.1988, by purchase of stamp papers for the same and the drafting
thereof, took place even before the matter was considered by the Board
10
in the meeting held on 29.09.1988 clearly revealed that there was
something suspect about the transaction. Given the further fact that the
only objective of the said agreement was to thwart the compulsory
acquisition of the subject land by returning a portion thereof to Bhagwan
Devi, the agreement was patently opposed to all tenets of law.
18. Viewed thus, we have no hesitation in holding that the Courts
exercising jurisdiction under Sections 34 and 37 of the Arbitration and
Conciliation Act, 1996, erred grievously in not setting aside the Arbitral
Award dated 10.07.2007 that had upheld the agreement dated
30.09.1988.
19. The appeal is accordingly allowed and the judgment dated
27.09.2013 of the Division Bench of the Delhi High Court in FAO (OS)
No. 436 of 2013 along with the judgment dated 01.07.2013 delivered by
the learned Judge of the Delhi High Court in OMP No. 561 of 2007 and
the Arbitral Award dated 10.07.2007 are set aside.
Pending applications shall stand closed in the light of this order.
Parties shall bear their own costs.
................................, CJI
Sanjiv Khanna
................................, J
Sanjay Kumar
March 20, 2025;
New Delhi.
11
2025 INSC 367
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 10757 OF 2017
Delhi Agricultural Marketing Board,
through its Chairman …..... Appellant
Versus
Bhagwan Devi (Dead),
through her LR. ..…... Respondent
J U D G M E N T
SANJAY KUMAR, J
1. Turning the law of land acquisition on its head, the
astonishing events that this appeal is founded on need to be narrated in
some detail.
2. An extent of 33 acres of land abutting the Narela-Bawana
Road was acquired by the Government to enable the Delhi Agricultural
Marketing Board (hereinafter, ‘the Board’) to shift and establish its grain
market in Narela. Notification under Section 4(1) of the Land Acquisition
Act, 1894 (for brevity, ‘the Act of 1894’), was issued on 30.10.1963.
Declaration under Section 6 of the Act of 1894 was issued on
10.01.1969 and the Award, determining the compensation, was made on
Signature Not Verified
19.09.1986. The acquired land included an extent of 6 bighas and 10
Digitally signed by
Deepak Guglani
Date: 2025.03.20
11:59:56 IST
Reason:
biswas situated in Khasra Nos. 296, 298 and 303 of Village Mamoorpur.
1
Bhagwan Devi claimed ownership over this smaller extent under
registered sale deeds of the years 1959 and 1971. Possession of the
acquired land was taken and handed over on 22.09.1986 to the
Agricultural Produce Marketing Committee, Narela, under the control of
the Board. This ostensibly included the extent of 6 bighas and 10 biswas
claimed by Bhagwan Devi. She, then, filed W.P. No. 149 of 1987 before
the Delhi High Court challenging the acquisition of her land.
3. It is at this stage that the story took a curious turn. The Board
resolved to settle the matter out of Court with Bhagwan Devi by
releasing and returning to her half of the acquired extent claimed by her
and retaining the remaining half, i.e., 3 bighas and 5 biswas. The
agreement in this regard was executed on 30.09.1988 by the Board,
through its then Chairman, with Bhagwan Devi. This agreement stated
that Bhagwan Devi would claim compensation as per the Award dated
19.09.1986 from the Land Acquisition Collector and would have all the
rights and remedies provided to her under the Act of 1894. The
agreement further recorded that, with the prior consent of the Land
Acquisition Collector, the Board, which had become the absolute owner
of the acquired land that was mutated in its favour in the revenue
records, would execute a proper conveyance deed in respect of the
portion of land proposed to be returned to her thereunder, for valuable
consideration. The consideration to be paid by Bhagwan Devi was
2
quantified as the proportionate compensation for half the land, as was
granted to her under the Award dated 19.09.1986, along with interest @
12 per cent per annum from the date of deposit of the compensation
amount by the Board with the Land Acquisition Collector till the date of
actual payment by Bhagwan Devi to the Board.
4. Clause (k) of the agreement provided that any dispute arising
between the parties touching upon the effect and meaning of the
agreement should be referred to the Chairman of the Board, whose
decision thereon would be final and binding upon the parties. This
agreement is stated to have been executed on behalf of the Board by its
then Chairman, just one day prior to his tenure coming to an end.
Though it is asserted that this action of the then Chairman was based on
the Minutes of the Board meeting held on 29.09.1988, there is no
mention of the same in the body of the agreement.
5. In any event, Writ Petition No. 149 of 1987 was disposed of
on 05.10.1988 in the light of this agreement. The Board seems to have
then realized that the land acquired for its benefit could not be released
in this manner and the issue was reconsidered in the Board’s meeting
held on 22.11.1988. The Minutes of this meeting recorded that, upon
enquiry, the authorities had informed the Board that though possession
of the acquired land was handed over to the Board, the land still vested
in the Government as no conveyance deed had been executed by the
3
Government in favour of the Board. The Board, therefore, opined that it
was necessary to review the whole matter. This was brought to the
notice of the Delhi High Court by filing an application to recall the order
dated 05.10.1988 passed in W.P. No. 149 of 1987. Bhagwan Devi had
also filed applications seeking implementation of the agreement dated
30.09.1988. The applications were taken up together and disposed of by
the Delhi High Court on 06.08.2002. By the said order, the High Court
left it open to Bhagwan Devi to avail appropriate remedies in accordance
with law and permitted the Board to raise all such objections as were
available to it, including the one mentioned in its application.
6. The turn of events then became ‘curiouser and curiouser’, to
put it in the words of Lewis Carroll’s Alice. Having slept over the matter
for two years, by way of notice dated 30.09.2004, Bhagwan Devi sought
‘arbitration’ under clause (k) of the agreement dated 30.09.1988! She
then filed an application, in Arb. P. No. 278 of 2004, seeking appointment
of an arbitrator. The same was allowed by the Delhi High Court on
17.05.2006 and a retired Judge of the Delhi High Court was appointed.
The Board contended before the Arbitrator that the agreement dated
30.09.1988 was void ab initio and could not be implemented as the land
acquisition authorities were not party to it and the acquired land could
not be returned without their consent. It also pointed out that the
agreement was brought into existence with undue haste, inasmuch as
4
the stamp papers therefor were purchased on 26.09.1988; the
agreement was drafted on 27.09.1988; the matter was put up before the
Board in its meeting held on 29.09.1988; and without confirmation of the
Minutes of the said meeting, the then Chairman signed the agreement
on 30.09.1988, which happened to be his last day in office.
7. However, the learned Arbitrator passed Award dated
10.07.2007 in favour of Bhagwan Devi, holding that the Board was
competent to enter into the agreement dated 30.09.1988 and return 3
bighas and 5 biswas of land to her. He accordingly directed the Board to
comply with the said agreement by performing its obligations thereunder
and execute a conveyance deed in favour of Bhagwan Devi. In turn,
Bhagwan Devi was also directed to perform her part of the agreement.
Aggrieved by the Award dated 10.07.2007, the Board filed a
8.
petition, vide OMP No. 561 of 2007, under Section 34 of the Arbitration
and Conciliation Act, 1996 (for brevity, ‘the Act of 1996’), before the Delhi
High Court. One of the grounds urged by the Board was that the Award
was against public policy. However, by order dated 01.07.2013, a
learned Judge of the Delhi High Court dismissed the petition, upholding
the Award in its entirety. Aggrieved thereby, the Board preferred an
appeal under Section 37 of the Act of 1996 in FAO (OS) No. 436 of
2013. The appeal also failed as a Division Bench of the Delhi High Court
dismissed it on 27.09.2013.
5
9. It is against the dismissal of the above appeal that the Board
filed SLP (C) No. 9491 of 2014, from which the present appeal
originates. By order dated 28.03.2014, this Court directed status quo
obtaining on that day to be maintained. Bhagwan Devi died on
13.01.2015 and her son was brought on record as her legal
representative. While so, an intervention application in IA No. 36403 of
2021 was filed by one Meena Sehrawat along with her sons, Pankaj and
Kunal. They put up a rival title over the subject land, claiming to be the
legal heirs of late Sanjay Sehrawat, the grandson of Bhagwan Devi’s
husband, late Kripa Ram, through his first wife. Be that as it may.
10. Initially, the Bombay Agricultural Produce Markets Act, 1939
(for brevity, ‘the Act of 1939’), was in force in Delhi. As per Section 16
thereof, if the Government was of the opinion that any land was needed
for the purposes of that Act, it could proceed to acquire it under the
provisions of the Act of 1894 and when such land vested in the
Government, it was to be transferred by the Government to the Market
Committee, on payment by the said Market Committee of the
compensation awarded and of all other charges incurred on account of
the acquisition, and on such transfer, the land would vest in that Market
Committee. Notably, this was the legal regime holding the field when the
notification and declaration were issued, in 1963 and 1969 respectively,
6
for acquisition of the 33 acres of land, which included the subject extent
of 6 bighas and 10 biswas.
11. However, when the agreement dated 30.09.1988 was
executed, the Delhi Agricultural Produce Marketing (Regulation) Act,
1976 (for brevity, ‘the Act of 1976’), was the extant legislation as the Act
of 1939 stood repealed thereby. The Board was constituted under
Section 5 of the Act of 1976 and in terms of Section 5(3) thereof, it was
to be a body corporate, having perpetual succession with power, subject
to the provisions of the Act of 1976, to acquire and hold property.
12. Thereafter, the present Delhi Agricultural Produce Marketing
(Regulation) Act, 1998 (for brevity, ‘the Act of 1998’), replaced the Act of
1976. It contains similar provisions in Section 6 thereof, which states that
the Board, constituted under Section 5 thereof, shall be a body corporate
and a local authority, having perpetual succession with power, subject to
the provisions of the said Act, to acquire, hold and dispose of property.
Section 24(1) thereof deals with the acquisition of land for markets and
states that when any land is required for the purposes of the Act of 1998
and the Board is unable to acquire the same by agreement, such land
may, at the request of the Board, be acquired under the provisions of the
Act of 1894 and on payment of the compensation awarded under the Act
of 1894 by the Board and all other charges incurred in connection with
such acquisition, the land shall vest in the Board. The proviso to Section
7
24(1), however, states that once a proposal has been made by the
Board, it shall not be withdrawn by it except for reasons recorded by it
and approved by the Lieutenant Governor. Section 24(2) of the Act of
1998 is of relevance and it reads as under:
‘(2) - The Board shall not, without the previous sanction of the
Lieutenant Governor, transfer any land which has been acquired
for the Board or Marketing Committee under sub-Section (1) or
vest in it or use such land for a purpose other than the purpose
for which it has been acquired, or is used, as the case may be.’
In effect, the power of the Board to acquire property, be it by
private negotiation or by compulsory acquisition through the aegis of the
Government, always stood protected. Such acquisition of property,
however, has to be in accordance with law, i.e., by way of a document of
conveyance. Further, as matters now stand, divesting of title in or a
different usage of the property compulsorily acquired for the Board is not
within its sole discretion.
13. In the case on hand, it is an admitted fact that the Award
determining compensation was passed on 19.09.1986 and possession
of the land was taken and handed over to the Board on 22.09.1986.
Section 16 of the Act of 1894 puts it beyond doubt that, upon possession
being taking over on 22.09.1986, the acquired land vested absolutely in
the Government free from all encumbrances. Significantly, the power of
withdrawal from an acquisition, under Section 48 of the Act 1894, can be
8
exercised by the Government only in respect of an acquisition where
possession of the land has not been taken. Therefore, it was not open
even to the Government to withdraw from the acquisition of the subject
land after possession was taken over on 22.09.1986, evidenced by
proper documentation.
14. In such a situation, the question that arises is whether the
Board, for whose benefit the land was acquired, could have achieved the
equivalent of such withdrawal by entering into an agreement with
Bhagwan Devi for returning part of the acquired land. Further, the
question would also arise whether the Board could exercise such power
when there was no document of conveyance in its favour in respect of
this land. The statutory scheme of the laws applicable to the Board at
different points of time, set out supra , speaks to the contrary as it
manifests that there must be a document of conveyance for the Board to
acquire and hold such land. Admittedly, no such document was ever
issued by the Government actually transferring the subject land to the
Board, whereby it could claim absolute rights over it.
15. The Board had raised these issues before the learned
Arbitrator, apart from claiming that the agreement dated 30.09.1988 was
contrary to public policy, but the Award dated 10.07.2007 came to be
passed holding against the Board. Neither the Court exercising
jurisdiction under Section 34 nor the Court exercising appellate power
9
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 the Court finds that it is in conflict with the public policy of India.
Explanation (1) thereto clarifies that an Award would be in conflict with
the public policy of India if it is in contravention of the fundamental policy
of Indian law or it is in conflict with the most basic notions of morality or
justice.
16. When the State uses its sovereign power of eminent domain
and acquires land for a public purpose, as in the case on hand, i.e., for
establishment of a grain market under the control of a statutory Board,
such an exercise cannot be set at naught by the beneficiary of such
acquisition, viz. , the statutory Board, by entering into a private
agreement shortly after the acquisition so as to reverse the usage of the
power of eminent domain by the State. Validating this dubious enterprise
by a statutory beneficiary of a compulsory acquisition would be nothing
short of permitting a fraud on the exercise of such sovereign power by
the State. Viewed thus, the agreement dated 30.09.1988 was clearly in
contravention of the fundamental policy of Indian law and the Arbitral
Award dated 10.07.2007, upholding the said agreement, was equally so.
17. Further, the fact that the preparation of the agreement dated
30.09.1988, by purchase of stamp papers for the same and the drafting
thereof, took place even before the matter was considered by the Board
10
in the meeting held on 29.09.1988 clearly revealed that there was
something suspect about the transaction. Given the further fact that the
only objective of the said agreement was to thwart the compulsory
acquisition of the subject land by returning a portion thereof to Bhagwan
Devi, the agreement was patently opposed to all tenets of law.
18. Viewed thus, we have no hesitation in holding that the Courts
exercising jurisdiction under Sections 34 and 37 of the Arbitration and
Conciliation Act, 1996, erred grievously in not setting aside the Arbitral
Award dated 10.07.2007 that had upheld the agreement dated
30.09.1988.
19. The appeal is accordingly allowed and the judgment dated
27.09.2013 of the Division Bench of the Delhi High Court in FAO (OS)
No. 436 of 2013 along with the judgment dated 01.07.2013 delivered by
the learned Judge of the Delhi High Court in OMP No. 561 of 2007 and
the Arbitral Award dated 10.07.2007 are set aside.
Pending applications shall stand closed in the light of this order.
Parties shall bear their own costs.
................................, CJI
Sanjiv Khanna
................................, J
Sanjay Kumar
March 20, 2025;
New Delhi.
11