One word — 'or' — meant 'and'. That saved thousands of land acquisitions.

Two shots at a land deal: How the Supreme Court rewrote the rules on acquisition lapse

When the Indore Development Authority acquired land for a housing scheme in the early 2000s, it followed the script. Notifications under the old Land Acquisition Act, 1894. A declaration. An award. Compensation was calculated, offered, and in many cases, deposited in the government treasury. The landowners, led by Manoharlal, didn't take the money. They went to court.

Sixteen years later, the Supreme Court of India was asked to decide whether that acquisition — and thousands like it — had simply vanished into thin air. The stakes were staggering. If the landowners were right, every acquisition where compensation hadn't been physically deposited in a civil court within five years of the award would lapse. Development authorities across India would have to start from scratch. The new 2013 Act, meant to protect landowners, would become a wrecking ball for public projects.

The five-judge bench — Justice Arun Mishra (author), Justice Indira Banerjee, Justice Vineet Saran, Justice M.R. Shah, and Justice S. Ravindra Bhat (dissenting) — delivered its answer on March 6, 2020. The judgment, reported as Indore Development Authority v. Manoharlal & Ors., 2020 SCC OnLine SC 2083, overruled the landmark Pune Municipal Corporation v. Harakchand Misrimal Solanki (2014) 3 SCC 183. It changed the meaning of a single word — "or" — and with it, the fate of thousands of land acquisition cases.

The word that started the war

Section 24 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (RFCTLARR Act) is a transitional provision. It deals with acquisitions started under the old 1894 Act but not completed when the new law came into force. Sub-section (2) says that if the acquisition proceedings started under the old Act have not resulted in either possession being taken or compensation being paid, the acquisition lapses.

The critical sentence reads: "where possession has not been taken or compensation has not been paid."

In Pune Municipal Corporation, a three-judge bench read the "or" disjunctively. That meant if either possession wasn't taken or compensation wasn't paid, the acquisition lapsed. The court also held that "paid" meant deposited in court under Section 31 of the old Act — not merely deposited in the government treasury. This interpretation gave landowners a powerful weapon. Even if the government had taken possession and offered compensation, if the money was still in the treasury and not in a civil court, the acquisition would lapse.

Development authorities cried foul. They argued that the Pune Municipal Corporation bench had missed key provisions — Section 34 of the old Act (which deals with interest on delayed payment), the standing orders on treasury deposits, and the legislative history of Section 24. In Indore Development Authority v. Shailendra (2018 SCC OnLine SC 100), a three-judge bench agreed that Pune Municipal Corporation appeared per incuriam and referred the matter to a larger bench.

What the trial court actually saw

The story begins in Bhind, Madhya Pradesh. The Indore Development Authority had acquired land for a residential scheme. The Special Judge & Second Additional Sessions Judge, Bhind, passed an award under Section 11 of the old Act. Compensation was calculated and offered. The landowners refused to accept it. The authority deposited the compensation in the government treasury.

Years later, the landowners approached the High Court, arguing that under Section 24(2) of the 2013 Act, the acquisition had lapsed because compensation had not been "paid" — meaning deposited in court. The High Court agreed, relying on Pune Municipal Corporation. The authority appealed to the Supreme Court.

By the time the matter reached the five-judge bench, the question was no longer just about one land deal in Bhind. It was about the correct interpretation of Section 24(2) for the entire country.

The six questions the bench framed

The bench framed six specific questions for determination:

• Whether the word "or" in Section 24(2) between "possession not taken" and "compensation not paid" is disjunctive or conjunctive?
• What is the meaning of "paid" in Section 24(2)? Does it mean deposited in court under Section 31 of the old Act, or does it include tender and deposit in the government treasury?
• Whether the proviso to Section 24(2) belongs to sub-section (2) or to sub-section (1)(b)?
• Whether the period during which court stays were in operation should be excluded for computing the five-year period?
• Whether Section 24(2) applies retrospectively to acquisitions completed before the 2013 Act came into force?
• Whether Pune Municipal Corporation and its progeny were correctly decided?

The arguments: two worlds collide

The landowners, through their counsel, argued that Pune Municipal Corporation was correctly decided. The word "or" in Section 24(2) was clearly disjunctive — Parliament intended that if either condition was not met, the acquisition should lapse. "Paid" meant actual receipt by the landowner or deposit in court under Section 31(2) of the old Act. Deposit in the government treasury was not enough. They also argued that the proviso to Section 24(2) was part of sub-section (1)(b), not sub-section (2), and therefore did not save acquisitions where compensation had been deposited for a majority of landholders.

The development authorities countered that Pune Municipal Corporation had misread the statute. The word "or" must be read as "and" — both conditions (no possession and no payment) must coexist for the acquisition to lapse. "Paid" included tender of compensation; deposit in the government treasury was sufficient compliance. The proviso belonged to sub-section (2) and carved out an exception to lapse where the majority of landholders had received compensation. They also argued that Section 24(2) should be narrowly construed to avoid undoing settled acquisitions, and that periods of court stay should be excluded.

The ratio: what the court actually held

The majority judgment, authored by Justice Arun Mishra, delivered five key holdings:

First, "or" means "and". The word "or" in Section 24(2) between "possession not taken" and "compensation not paid" must be read conjunctively. Both conditions must coexist for the acquisition to lapse. If either possession has been taken or compensation has been paid (or tendered), the acquisition survives.

Second, "paid" includes tender. "Paid" in Section 24(2) does not require deposit in court under Section 31(2) of the old Act. It includes tender of compensation and deposit in the government treasury. The court relied on Benares State Bank Ltd. v. CIT (1969) 2 SCC 316 and J. Dalmia v. Commissioner of Income Tax (1964) 53 ITR 83 to hold that "paid" connotes making the amount available, not actual receipt by the payee.

Third, the proviso belongs to sub-section (2). The proviso to Section 24(2) is part of sub-section (2), not sub-section (1)(b). It carves out an exception to the lapse provision: where the majority of landholdings have had compensation deposited, the acquisition does not lapse even if the conditions of sub-section (2) are otherwise met.

Fourth, retrospectivity is narrow. Section 24(2) is retrospective in the sense that it applies to acquisitions pending when the 2013 Act came into force. But it must be narrowly construed to save ongoing acquisitions. Parliament did not intend to undo settled transactions. The court cited Zile Singh v. State of Haryana (2004) 8 SCC 1 and CIT v. Sarkar Builders (2015) 7 SCC 579 for the principle that retrospectivity should not be presumed unless the statute clearly says so or by necessary implication.

Fifth, Pune Municipal Corporation is overruled. The court held that Pune Municipal Corporation was decided per incuriam — it failed to consider Section 34 of the old Act (which provides for interest on delayed payment), the standing orders on treasury deposits, and the legislative history of Section 24. All decisions following Pune Municipal Corporation, including Sree Balaji Nagar Residents Association v. State of Tamil Nadu (2015) 3 SCC 353, were also overruled.

THE PLAY: If you represent a development authority facing a lapse claim under Section 24(2), argue that the acquisition survives if either possession was taken or compensation was tendered — even if the money remains in the government treasury. The old Pune Municipal Corporation test is dead.

The dissent: Justice Bhat's warning

Justice S. Ravindra Bhat dissented. He argued that the majority's reading of "or" as "and" effectively rewrote the statute. Parliament had deliberately used "or" to give landowners a choice — if either condition was not met, the acquisition should lapse. He also argued that "paid" should mean actual payment or deposit in court, not mere tender. The dissent warned that the majority's interpretation would weaken the protective purpose of the 2013 Act.

But the majority held that a literal reading of "or" would lead to absurd results. If "or" were disjunctive, an acquisition where possession was taken but compensation was delayed by a day would lapse — even if the landowner had been using the land for years. That could not have been Parliament's intention.

Why this matters in practice

For advocates, this judgment is a masterclass in statutory interpretation. The court used multiple tools — textual analysis, legislative history, purposive interpretation, and the rule against absurdity — to reach its conclusion. The key takeaway: when a statute uses "or" in a transitional provision, the court may read it as "and" if a disjunctive reading would produce absurd or unintended results.

For CFOs and founders, the judgment provides certainty. If your company has acquired land for a project and compensation was tendered or deposited in the treasury, the acquisition is safe — even if the money hasn't reached every landowner's bank account. The old fear that a technical failure to deposit in court could undo the entire acquisition is gone.

For development authorities, the judgment is a lifeline. Thousands of cases pending in high courts across India, where landowners had argued that acquisitions had lapsed under Pune Municipal Corporation, will now be decided in favour of the authorities — provided they can show that either possession was taken or compensation was tendered.

The bottom line

Indore Development Authority v. Manoharlal is the definitive interpretation of Section 24(2) of the RFCTLARR Act, 2013. The word "or" is now "and". "Paid" includes tender. The proviso belongs to sub-section (2). Pune Municipal Corporation is dead. If you are defending an acquisition against a lapse claim, your first argument is this: the acquisition survives if either possession was taken or compensation was made available — even if the landowner refused to take it.