When Does Land Acquisition Lapse? Rethinking the Meaning of Paid Compensation under Section 24 (2)

Introduction

Compulsory acquisition of private land is an indispensable instrument of State-led development, yet it sits uneasily beside the individual’s right to property. The tension is sharpest when the State takes years to complete an acquisition, or to pay for it. For acquisitions begun under the old law, Parliament addressed that problem in Section 24 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (2013 Act).^[1] Section 24(2) deems certain proceedings under the Land Acquisition Act, 1894 (1894 Act) to have lapsed. Two questions have dominated the litigation: when does lapse occur, and what does it mean to say that compensation has been “paid”? This post traces how the Supreme Court answered both, tests that answer against the rights of landowners, and examines its recent application by the Gujarat High Court.

Section 24: The Transitional Scheme

The 2013 Act came into force on 1 January 2014 and replaced the 1894 Act. Since a large number of acquisitions were then pending, Section 24 operates as a transitional bridge between the two statutes.^[2] Where no award had been made under Section 11 of the 1894 Act, compensation is determined afresh under the 2013 Act. Where an award had been made, Section 24(1)(b) allows the proceedings to continue under the 1894 Act.

Section 24(2) is the exception. If an award was made five years or more before the commencement of the 2013 Act, but “physical possession of the land has not been taken or the compensation has not been paid”, the proceedings are deemed to have lapsed and any fresh acquisition must proceed under the 2013 Act.^[3] A proviso adds that where compensation in respect of a majority of landholdings has not been deposited in the account of the beneficiaries, all beneficiaries named in the original Section 4 notification become entitled to compensation under the 2013 Act.^[4] Everything turned on one word. Did “or” mean that failure of either condition would end the acquisition, or that both had to remain unfulfilled?

From Pune Municipal Corporation to Indore Development Authority

The early decisions favoured landowners. In Pune Municipal Corporation v Harakchand Misirimal Solanki, the Supreme Court held that compensation is not “paid” merely because it has been placed in the government treasury; where Section 31(2) of the 1894 Act applied, it had to be deposited in court.^[5] In Sree Balaji Nagar Residential Association v State of Tamil Nadu, the Court refused to exclude the period of judicial stay from the five-year computation.^[6] Read together, these rulings made lapse relatively easy to establish, and inconsistent benches soon produced uncertainty.

A five-judge Bench settled the matter in Indore Development Authority v Manoharlal, overruling both decisions.^[7] The Court held that “or” in Section 24(2) must be read as “nor” or “and”. Proceedings lapse only where the authorities have neither taken physical possession nor paid compensation for five years or more, and the period during which interim court orders operated is excluded from that computation. The practical consequences are summarised below.

What Does “Paid” Compensation Mean?

The most consequential part of Indore concerns the word “paid”. Section 31(1) of the 1894 Act requires the Collector to tender payment to the persons entitled. Section 31(2) provides for deposit in court where the person refuses to accept, is not competent to receive, or where there is a dispute about title or apportionment.^[8] The Constitution Bench held that the duty to pay is discharged by tender; actual receipt by the landowner is not indispensable. A landowner who declines a valid tender cannot later claim that compensation was never paid.

The Court also separated “payment” in the main provision from “deposit” in the proviso. Failure to deposit in court does not by itself cause lapse; its consequence is the one the proviso prescribes, namely compensation under the 2013 Act for the beneficiaries. Where the obligation under Section 31 remained unmet, the landowner may also claim interest under Section 34 of the 1894 Act.^[9] Non-payment, non-deposit and lapse are therefore three distinct legal questions, a distinction frequently blurred in pleadings.

Possession is treated with equal pragmatism. For large tracts, a memorandum or panchnama recording the taking of possession is a recognised mode, and once possession is validly taken the land vests absolutely in the State under Section 16, free from encumbrances.^[10] Section 24(2), the Court stressed, creates no fresh cause of action to revive stale claims or reopen concluded acquisitions.

The Contemporary Position

The consequences of the shift in doctrine were considered in Government of NCT of Delhi v K.L. Rathi Steels Ltd, where the Supreme Court dealt with acquisitions earlier declared lapsed on the strength of the overruled reading. Invoking Article 142, it fashioned a special mechanism to reconcile landowners who had succeeded under the old position with the public interest in long-pending projects.^[11]

The principle is being applied by High Courts today. In Deceased Jivrajbhai Karabhai v State of Gujarat, decided on 13 April 2026, the petitioner sought a declaration that an acquisition under the 1894 Act, with an award passed in 2000, had lapsed because compensation was neither paid nor tendered and possession remained with the landowner. Relying on Indore, the Gujarat High Court reiterated that both conditions must be unfulfilled, that tender under Section 31(1) suffices, and that possession may be proved by panchnama. It held that vague assertions of non-payment and non-possession, unsupported by particulars, could not establish deemed lapse, and dismissed the petition.^[12] The decision is an application of the Constitution Bench’s law, not a departure from it, but it shows how heavily the outcome now depends on evidence.

Critical Analysis: Has the Balance Been Struck?

Indore delivers certainty, and certainty has value: public projects should not be unsettled decades later by technical arguments. Yet three concerns remain.

First, tender must be proved, not presumed. If tender discharges the State’s obligation even against a landowner who never received a rupee, the integrity of the tender record becomes the only safeguard. Courts should insist on contemporaneous documentary proof, such as notices, acknowledgments and treasury or court records, rather than accept a bare assertion that compensation was offered. The Jivrajbhai ruling cuts both ways here: it rightly demands particulars from the petitioner, and the same standard must bind the acquiring authority. Moreover, a landowner who refuses an offer he considers inadequate is disputing the amount, not the obligation. His statutory right to seek enhancement through a reference survives, and refusal should not be mistaken for waiver.^[13]

Second, the conjunctive reading leaves the landowner who has lost possession without payment relying on interest. Article 300A forbids deprivation of property save by authority of law, and the Supreme Court has recognised property as a constitutional right.^[14] In Tukaram Kana Joshi v MIDC, the Court refused to let the State retain land taken without compensation merely because the owner had approached the court late.^[15] That reasoning sits uneasily with an approach in which a State that has held land and paid nothing for decades faces no consequence beyond statutory interest, which may not reflect the true cost of long deprivation.

Third, finality should not become a shield for non-compliance. In my view, the correct reading of Indore is that it narrows the remedy of lapse, not the State’s duty to pay. Where possession was taken and compensation remains unpaid, courts should treat the claim as a continuing obligation and enforce it through directions for immediate payment and full interest, rather than let the acquisition’s continuity do the State’s work for it.

Conclusion

After Indore Development Authority v Manoharlal, acquisition proceedings lapse under Section 24(2) only when physical possession has not been taken and compensation has not been paid for the prescribed period. Proper tender amounts to payment, and non-deposit invites the separate consequence in the proviso. The law thus protects the finality of public acquisitions and prevents landowners from profiting from their own refusal to accept compensation. But finality is only as legitimate as the State’s compliance. The real task for courts is to ensure that the State does not enjoy the fruits of compulsory acquisition while postponing its corresponding obligation to compensate.

[1]The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act 2013 (30 of 2013), s 24.

[2]Land Acquisition Act 1894 (1 of 1894), ss 11, 16 and 31; 2013 Act (n 1) s 24.

[3]2013 Act (n 1) s 24(2).

[4]2013 Act (n 1) s 24(2), proviso.

[5]Pune Municipal Corporation v Harakchand Misirimal Solanki (2014) 3 SCC 183.

[6]Sree Balaji Nagar Residential Association v State of Tamil Nadu (2015) 3 SCC 353.

[7]Indore Development Authority v Manoharlal (2020) 8 SCC 129, paras 365–366.

[8]Land Acquisition Act 1894 (n 2) s 31(1)–(2).

[9]Land Acquisition Act 1894 (n 2) ss 16 and 34.

[10]Indore Development Authority (n 7) paras 365–366.

[11]Government of NCT of Delhi v K.L. Rathi Steels Ltd (2024) 7 SCC 315.

[12]Deceased Jivrajbhai Karabhai v State of Gujarat R/Special Civil Application No 9313 of 2017 (Guj HC, 13 April 2026).

[13]Land Acquisition Act 1894 (n 2) s 18.

[14]Constitution of India, art 300A; K.T. Plantation Pvt. Ltd. v State of Karnataka (2011) 9 SCC 1.

[15]Tukaram Kana Joshi v Maharashtra Industrial Development Corporation (2013) 1 SCC 353.

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