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LATEST NEWS UPDATES | Acres of contention -Ram Singh

Acres of contention -Ram Singh

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published Published on Jun 19, 2018   modified Modified on Jun 19, 2018
-The Hindu

The judiciary doesn’t seem to fully appreciate the economic consequences of its judgments

The number of legal disputes involving property, contract, labour, tax and corporate laws is bound to increase with an expanding economy. How they are adjudicated by courts not only has direct consequences for the disputants, but also shapes the behaviour of individuals and entities involved in production, commerce and banking. Judicial findings also influence decision-making of government agencies, which are major actors in a developing economy. Yet, the Indian judiciary doesn’t seem to fully appreciate the economic consequences of its judgments.

Case studies

A case in point is a May 31, 2018 order of the Allahabad High Court — Independent Power Producers Association of India v. Union of India and Ors. The court has ruled that bankruptcy proceedings cannot be started against a power company unless the company is a wilful loan defaulter. It did not factor in the issue of viability of the project. As such, the ‘wilfulness’ condition is hard to prove. Nonetheless, the ruling is one of the less problematic ones.

Consider another judgment, this time from the Supreme Court (SC) in Rameshwar and Ors v. State of Haryana and Ors (2018). Here, the dispute involved 688 acres of land for which the then Haryana government had issued an acquisition notification in 2007. As soon as the notification was issued, developers started approaching owners to buy their land. Since the official compensation was going to be meagre, many owners sold their land at throwaway prices. Later, the government decided to drop the acquisition plan. By then, hundreds of acres had been purchased by builders through such deals. In flagrant disregard for the rules, the State authorities not only approved the land deals but further obliged the builders with regulatory approvals. Unsurprisingly, the SC held the State’s decision a fraud, acted out through an unholy nexus between the officials and the builders.

As the owners sold their land under duress and on unconscionable terms, the land should have been restored to them by declaring the deals infructuous. However, the SC handed over the land to the State government.

In Uddar Gagan Properties Ltd v. Sant Singh & Ors (2016), at dispute were 280 acres of land under acquisition in 2005. The land was illegally transferred to developers through dubious deals approved by the then Haryana government. Here too, the SC handed over the land to the official agency that was an active partner in the fraud. Farmers were forced to accept paltry compensations.

Through such judgments, the judiciary has failed not only to protect the legitimate rights of owners, but also to provide economic justice enshrined in Article 38 of the Constitution. Moreover, the court has transferred land, a precious economic resource, from those who own, need and use it to governments who do not need it by their own accord. Transfers have been forced for a cause known neither to the beneficiary governments nor to the judiciary. It is due to the perverse incentives created by such judgments that government agencies abuse laws and are sitting on a massive stock of unused land, which would have been put to more productive use by its owners.

Several infrastructure projects are being held up due to judicial interventions in the bidding process. Courts should realise that the quality of infrastructure assets and the technical capability of contractors to deliver them are serious issues. The mere difference in prices demanded by the bidder may or may not be a decisive factor. On the contrary, the court’s intervention can delay the project, escalating its cost far more than any possible gains from ruling in favour of the lowest price bidder.

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The Hindu, 19 June, 2018, http://www.thehindu.com/opinion/op-ed/acres-of-contention/article24194912.ece?homepage=true


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