Case Note & Summary
The Supreme Court allowed the appeal filed by M/s Ultra-Tech Cement Ltd. against the order of the Himachal Pradesh High Court dated 12.07.2022. The High Court had directed Ultra-Tech to pay the supplementary compensation amount of Rs. 3,05,31,095/- determined by the Land Acquisition Collector (LAC) on 02.05.2022, with liberty to recover from Jaiprakash Associates Limited (JAL). The dispute arose from the acquisition of land in 2008 for JAL's cement project. After the acquisition award of 2018, JAL deposited compensation and took possession. Meanwhile, Ultra-Tech acquired certain assets of JAL under a Scheme of Arrangement approved by NCLT in 2017, with an effective date of 29.06.2017. The supplementary award was passed later for structures not initially evaluated. The High Court held Ultra-Tech liable under Clause 7.1 of the scheme. The Supreme Court found that the scheme expressly excluded contingent liabilities of pending litigations not crystallized on the effective date. Since the acquisition proceedings were pending and the claim was not crystallized until the supplementary award, the liability remained with JAL. The Court also noted that the subject land was not transferred to Ultra-Tech under the scheme. The Supreme Court set aside the High Court's order and directed that the liability to pay the supplementary compensation is solely of JAL.
Headnote
A) Land Acquisition - Compensation Liability - Scheme of Arrangement - The liability to pay compensation under a supplementary award for land acquired prior to the effective date of a scheme of arrangement remains with the original beneficiary company (JAL) where the scheme expressly excludes contingent liabilities of pending litigations not crystallized on the effective date. The High Court erred in directing the transferee company (appellant) to pay at first instance. (Paras 1-15, 18-24) B) Companies Act, 1956 - Sections 391-394 - Scheme of Arrangement - Interpretation of Clause 7.1 - Contingent liabilities pertaining to pending litigations where disputed claims are not crystallized on or before the effective date are the sole liability of the transferor company (JAL). The transferee company (appellant) is not liable for such liabilities unless specifically assumed. (Paras 18-24) C) Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 - Section 24 - Supplementary Award - The LAC's supplementary award dated 02.05.2022 fixed liability on JAL, and the High Court could not shift that liability to the appellant without considering the scheme's terms. (Paras 7-10, 25-27) D) Constitution of India - Article 300-A - Right to Property - The State's role in land acquisition does not extend to imposing liability on a third-party transferee of assets in disregard of contractual arrangements between private parties. (Paras 30-36)
Issue of Consideration
Whether the appellant, as a transferee of certain assets under a Scheme of Arrangement, is liable to pay the supplementary compensation awarded in land acquisition proceedings that were pending on the effective date of the scheme, or whether such liability remains with the original beneficiary company (JAL).
Final Decision
The Supreme Court allowed the appeal, set aside the impugned order of the High Court dated 12.07.2022, and held that the liability to pay the supplementary compensation amount determined under the Supplementary Award dated 02.05.2022 is solely of M/s Jaiprakash Associates Limited (JAL), and the appellant is not liable to pay the same.
Law Points
- Scheme of Arrangement
- contingent liability
- land acquisition compensation
- transfer of assets
- liability of transferee company
- interpretation of clauses in scheme
- Section 4 of Land Acquisition Act
- 1894
- Section 24 of Right to Fair Compensation and Transparency in Land Acquisition
- Rehabilitation and Resettlement Act
- 2013
- Article 300-A of Constitution of India
