‘Monumental fraud’: Karnataka High Court orders CBI probe against govt officials over 63-acre land grab

The order added, “We cannot expect an impartial and independent investigation at the hands of the State agencies when State instrumentally itself was involved in committing the monumental fraud. Therefore, it is required that the matter should be investigated by an independent agency for proper, impartial and unbiased investigation.”

The court quashed the final notification issued by the government for acquiring 63.33 acres of land belonging to private persons. It also directed M/s. Lakeview Tourism Corporation, for whom the lands were acquired, to pay a cost of Rs 10 lakh to the Army Battle Casualties Welfare Fund, within four weeks.

How the land came to be acquired

Appellants Krishna Reddy and others, who own lands in Hebbal and Ammanikere villages of Bengaluru, challenged the 2004 notification issued by the state government under provisions of the Karnataka Industrial Areas Development (KIAD) Act, 1966.

They contended in the appeal that promoters of Lakeview Tourism Corporation had in 2000—when the company was not even incorporated—approached the state government, intending to establish ‘Unicare Tourist Centre’, which consisted of a resort, a five-star hotel, an amusement park and other recreation facilities. They had claimed that they had already negotiated with the landowners for the sale of 33 acres of land in their favour, and they would require another 37 acres of land in the same area for their project. The total investment proposed by the company was Rs 250 crore.

The application was made by the promoters of a non-incorporated entity and was bereft of any details, but a high-level committee, within five days of the application being made, in its meeting held on June 28, 2000, considered the proposal and decided to recommend to the government to acquire the land as identified by the said entity.

Following this, a preliminary notification was issued on November 25, 2002, proposing to acquire 63.33 acres of land in Hebbal and Hebbal Ammanikere villages and sought objections from the landowners. Despite several objections, a final notification under Section 28(4) of the KIAD Act was issued on May 11, 2004, to acquire 53 acres and 26 guntas of land.

The non-existent entity, which promised to commence its operation with effect from December 31, 2001, by employing 2,000 people, had a net worth of Rs 8.60 lakh in the financial year 2022-23.

In 2011, the entity came to be incorporated in the Memorandum of Association, and disclosed that the promoters of the entity were Sushil Mantri and Snehal Mantri, of the now-defunct real estate developer. None of the promoters, whose background was given with the application in 2000 as promoters or shareholders of Lakeview Development Corporation Private Limited, was a part of it.

Senior Advocate K N Phanindra argued that the land acquisition proceedings in favour of Lakeview Tourism Corporation attained finality by the decision of the high court, which upheld the acquisition in 2014. Therefore, the challenge to such acquisition proceedings in writ petitions filed by the appellants would not be maintainable, and the appeals ought to be dismissed. He contended that the single-judge order dismissing the petition was correct and required no interference.

Government can’t acquire land for individual entity

The bench in its order referred to the objective of the KIAD Act, which is to acquire the land for the purpose of setting up industrial areas and not for acquiring the land for an individual/non-existent entity. In its order, it opined, “The object of the Act is the public purpose in creating industrial areas for development of the industries and industrialisation of the State and not for the purpose of creating wealth and income in the hands of individual entities/persons.”

The order added, “Setting up an industrial area is a public purpose and not putting the land after exercising the power of eminent domain in the hands of unknown parties, real estate developers and such other persons would not be in the line of the objects of the KIAD Act, and it is nothing but a fraud on statute committed by the authorities to divest the landowners from their land holdings for a pittance.”

Right to property under Article 300A is a human right

The bench, in its order, referred to Article 300A of the Constitution of India, which provides that “no person shall be deprived of his property except by authority of law”. The court said, “The right of property is not only a constitutional or statutory right but also a human right. Though it is not a basic feature of the Constitution or fundamental rights, human rights are considered to be in the realm of individual rights such as, the right to health, right to livelihood, right to shelter and employment etc.”

Following which, the order said, “Deprivation of property even under the provisions of the statute within the meaning of Article 300A must take place for public purpose or public interest.”

The bench also underscored, “Depriving the landowners of their land for private interest and merely incidentally beneficial to the public is against the foundational principle of the Constitution i.e., the rule of law, and it is against the constitutional mandate as provided under Article 300A.”

Can exercise eminent domain power, but not to legitimise ‘illegal exercise’

The court, in its order, clarified that the State can exercise the eminent domain power for a private entity, but only when there is a genuine public purpose and the cost of acquisition (including compensation) is borne by the State instrumentality or the public fund so that the transaction remains by the State for public purpose.

Further, the order added, “State can compulsorily acquire land of private persons, but this proposition cannot be overstressed to legitimize a patently illegal and fraudulent exercise undertaken for depriving the landowners of their constitutional right to property with a view to favour private persons.”

Further, the court held that when the acquisition is not for a genuine public purpose, “but it is masked for private gain”, it would be “a colourable exercise of the power and fraud on the statute and Constitution and against Articles 14, 19 and 21 of the Constitution of India”.

Finality does not immunise fraud

Rejecting the contention of the private entity that the acquisition had attained finality by previous high court orders, the bench said, “Even where a competent court has rendered a final decision, fraud discovered later can invalidate that decision and permit recall or correction. The finality of judicial proceedings cannot cure fraud and the fraud, if discovered later, is a ground to reopen or declare a final decision as void.”

Accordingly, the court held, “We have noted the facts which would clearly indicate a monumental fraud having been committed by the State Authorities in collusion, collaboration and criminal conspiracy with the private individuals. Therefore, we are of the considered view that the earlier judgments would not come in the way of declaring the land acquisition proceedings as null and void as they are vitiated from the very inception on the ground of fraud and misrepresentation.”

Allowing the appeal, the bench in its order said, “As the State instrumentality itself was involved in criminal conspiracy with the private individuals, we need to get this matter investigated by an independent agency for the crime committed by the persons including the State Government officials and the private individuals.”