When One Illegal Compensation Cannot Cancel All: Supreme Court on Limits of Setting Aside Land Acquisition Awards

Introduction

Land acquisition disputes often involve complex questions of valuation, fairness, and administrative propriety. When allegations of corruption or excessive compensation arise, courts are frequently called upon to balance two competing interests: the need to correct illegality and the need to protect innocent landowners from arbitrary deprivation of compensation.

In its judgment delivered on 27 January 2026, the Supreme Court addressed a critical issue in land acquisition law: whether an award of compensation for land acquisition can be set aside in its entirety merely because some landowners were found to have received excessive compensation through collusion with officials.

The Court gave a clear answer. Illegality affecting a few beneficiaries cannot automatically invalidate the entire award, especially in the absence of allegations, inquiry, or proceedings against other landowners. The judgment reinforces foundational principles of administrative law, natural justice, and statutory interpretation under the Railways Act, 1989 and the Land Acquisition (Special Railway Projects) Rules, 2016.

Factual Background

The case arose out of land acquisition undertaken by the State of Chhattisgarh for a Special Railway Project connecting Rowghat to Jagdalpur. The project involved acquisition of land from approximately 550 landowners across multiple villages.

A notification for acquisition was issued on 31 August 2017. Subsequently, the Competent Authority passed an award on 12 February 2018, determining compensation payable to the affected landowners. Dissatisfied with the compensation, some landowners invoked Section 20-F(6) of the Railways Act, 1989, seeking enhancement before the Arbitrator appointed under the 2016 Rules.

The Arbitrator granted enhanced compensation in certain cases.

Allegations of Excessive Compensation and Collusion

Following the enhancement, serious allegations emerged. An inquiry conducted by the Collector revealed that certain landowners had allegedly received compensation far in excess of actual market value. It was alleged that this was done through collusion between revenue officials, the Competent Authority, and the Arbitrator, amounting to a colourable exercise of power.

Based on the inquiry report:

• FIRs were registered against government officials and certain landowners
• Bank accounts of some beneficiaries were frozen
• Proceedings were initiated to recover allegedly excess amounts

It is crucial to note that these proceedings were directed only against specific landowners named in the inquiry report.

Writ Proceedings Before the High Court

Multiple writ petitions were filed before the High Court of Chhattisgarh:

• By government officials challenging the inquiry and criminal proceedings
• By certain landowners alleged to have benefitted
• By Bastar Railways Private Limited, a joint venture company executing the project

In its judgment dated 10 January 2022, the High Court:

• Set aside the original award dated 12.02.2018
• Set aside the arbitral award dated 11.07.2019
• Directed fresh determination of compensation
• Directed refund of amounts already received, subject to re-determination

This judgment was passed only against the landowners who were impleaded in the writ petitions.

Position of the Appellant: Neeraj Jain

The appellant, Neeraj Jain, stood on a different footing.

He was:

• A landowner affected by the same acquisition
• Granted compensation under the award dated 12.02.2018
• Granted enhancement by the Arbitrator on 28 June 2019

However:

• He was not named in the inquiry report
• No allegation of collusion or unjust enrichment was made against him
• His bank account was not frozen
• No FIR was lodged against him
• He was not impleaded in the writ petition filed by the Railways

Despite this, relying on the earlier High Court judgment, authorities:

• Kept disbursement of his enhanced compensation in abeyance
• Later cancelled both the original award and the arbitral enhancement in his favour

His writ petition challenging these actions was dismissed, and so was the writ appeal. This led him to approach the Supreme Court.

Core Legal Issue Before the Supreme Court

The Supreme Court framed the central issue as follows:

Does setting aside an award of compensation on grounds of excessiveness and collusion, in respect of certain landowners, automatically result in setting aside the entire award covering all landowners?

Closely connected to this were additional questions:

• Can an award be cancelled without specific allegations against a landowner?
• Does the Railways Act confer any power of review on the Competent Authority or Arbitrator?
• Can innocent beneficiaries be affected by proceedings to which they were not parties?

Supreme Court’s Analysis: Individual Liability, Not Collective Punishment

The Court began by carefully examining the scope of the inquiry report and the subsequent proceedings. It noted that allegations of excessive compensation were confined to a small group of landowners.

Out of approximately 550 landowners, only five to seven individuals were identified as having received compensation allegedly far beyond market value.

The Court held that:

• There was no identity of allegations against the appellant
• There was no similarity in quantum of compensation
• There was no finding of unjust enrichment in his case

Thus, the foundational basis for cancelling the award in his favour was missing.

Significance of Non-Impleadment

A major factor influencing the Court’s decision was the fact that:

• The appellant was not impleaded in the writ petition filed by the Railways
• The writ petition did not claim to be filed in a representative capacity
• There was no legal basis to treat a few landowners as representing hundreds of others

The Court reiterated the settled principle that individual landowners cannot be bound by adverse orders passed in proceedings to which they were not parties, especially when their rights are distinct and independent.

Limits of the High Court’s Earlier Judgment

The Supreme Court made an important observation: even the High Court, in its earlier judgment, should have confined the effect of setting aside the award only to the landowners who were impleaded and against whom allegations existed.

The High Court erred in allowing a spill-over effect, where innocent landowners suffered consequences of proceedings aimed at others.

The Court described this as a fundamental error, contrary to principles of fairness and legality.

No Power of Review Under the Railways Act

Another decisive aspect was statutory interpretation.

The Court noted that:

• The Railways Act, 1989 does not confer any power of review
• The Competent Authority cannot recall or cancel its own award
• The Arbitrator appointed under the 2016 Rules also has no review power

Once an award is passed, it can be challenged only in the manner prescribed by law, not through administrative recall based on external inquiries.

Thus, keeping the appellant’s compensation in abeyance and later cancelling it was without jurisdiction.

Pendency of Other SLPs: No Bar to Relief

The Railways argued that since other landowners had challenged the High Court judgment before the Supreme Court, the appellant’s appeal should await that outcome.

The Court firmly rejected this argument, holding that:

• The appellant’s case was factually and legally distinct
• He was not proceeded against
• The outcome of other SLPs would have no bearing on his rights

Justice cannot be delayed merely because other litigations are pending.

Restoration of Award and Enhancement

Having found grave illegality, the Supreme Court:

• Set aside the High Court’s orders
• Set aside the administrative orders cancelling the appellant’s compensation
• Restored the original award dated 12.02.2018
• Restored the arbitral enhancement dated 28.06.2019

The Court directed payment of:

• Balance compensation
• Solatium
• Interest
  within three months.

Key Legal Principles Laid Down

This judgment lays down several important principles:

1. Illegality must be individualised; it cannot be presumed collectively
2. Awards cannot be set aside wholesale when allegations concern only a few
3. Natural justice requires notice and hearing to every affected landowner
4. Statutory authorities cannot assume review powers not granted by law
5. Innocent beneficiaries cannot suffer for alleged misconduct of others

Practical Implications

For Landowners

This judgment protects landowners from arbitrary cancellation of compensation due to disputes involving others.

For Acquiring Authorities

Authorities must proceed case-wise, with evidence and jurisdiction, not through sweeping administrative actions.

For Lawyers

The case is a strong precedent against:

• Collective punishment
• Jurisdictional overreach
• Misuse of inquiry reports

Conclusion

The Supreme Court’s decision reaffirms a simple but powerful principle: justice must be personal, not collective. Administrative convenience or allegations against a few cannot override statutory rights of many.

The judgment restores faith in the rule of law by ensuring that only proven illegality is corrected, and innocence is not collateral damage.

Case Name:
Neeraj Jain v. Competent Authority-cum-Additional Collector, Jagdalpur & Ors.,
Civil Appeal arising out of SLP (C) No. 7061 of 2025,
Supreme Court of India, Judgment dated 27 January 2026 (2026 INSC 86).