Safiya Malik

The Bombay High Court has set aside an order issued by the Land Acquisition Officer (LAO) that apportioned compensation among the partners of a construction firm without referring the matter to a civil court. The court ruled that disputes regarding apportionment must be decided by a competent civil court and directed the LAO to make the necessary reference within two months.

A writ petition was filed concerning the apportionment of compensation for land acquired under the Maharashtra Highways Act, 1955 (MH Act). The dispute arose between the partners of M/s Shree Tirupati Construction, a registered partnership firm, regarding the disbursal of Rs.27,74,18,154/- awarded for the acquisition of land situated in Pune district. The petitioners sought to have the compensation deposited in the firm’s account, while the respondents argued for direct disbursal to individual partners.

The petitioners contended that as per the partnership deed dated December 1, 2007, all four partners held equal shares in the firm. They argued that since the acquired land was purchased by the firm, compensation should be credited to the firm's account, not individual partners’ accounts. The petitioners also relied on the firm’s financial records, which showed the land’s purchase costs recorded under project expenses. They argued that disbursing the compensation individually would not align with the firm’s partnership structure and could create further complications.

The fourth and fifth respondents, on the other hand, submitted that the land was purchased by individual partners and not the firm itself. They pointed to the fact that the firm’s balance sheets did not reflect the acquired property as part of its assets. They further contended that the LAO was justified in dividing the compensation among the partners according to their shares in the land records. The respondents also argued that the partners had independent financial interests in the land and that compensation should be disbursed accordingly.

The LAO, in an order dated March 11, 2024, had apportioned the compensation equally among the four partners, directing that it be paid into their respective individual accounts. The order stated that the revenue records indicated separate ownership shares for each partner, and the LAO deemed it appropriate to allocate the funds based on these records. This decision was challenged by the petitioners, who asserted that the LAO lacked the jurisdiction to decide apportionment disputes.

The petitioners argued that the firm was a legally recognized entity and, as per partnership law, compensation related to firm-owned assets should be credited to the firm’s account. They contended that any division of the compensation should be determined through legal proceedings and not at the discretion of the LAO.

The division bench of Justice M.S. Sonak and Justice Jitendra Jain examined Sections 19B and 19C of the MH Act, which deal with compensation determination and disbursal. The court observed that while the LAO could determine the persons entitled to compensation, any dispute regarding apportionment must be referred to a civil court. The court referred to Vinod Kumar v. District Magistrate Mau, in which the Supreme Court ruled that apportionment disputes must be adjudicated by a principal civil court.

The bench recorded:

“Even the LAO should not take it upon itself to determine the dispute of apportionment of the compensation. The reasons for this fine distinction between determining the compensation amount and the apportionment of the compensation amount have been succinctly explained by the Hon’ble Supreme Court in Vinod Kumar.”

The court further noted that a previous writ petition filed by the petitioners (WP No. 4363 of 2024) had been withdrawn with liberty to file a fresh petition. The court had earlier directed the state government and LAO to deposit the compensation amount in the registry of the High Court pending resolution of the dispute. The division bench reiterated that the apportionment dispute was to be decided strictly as per Section 19C(4) of the MH Act, requiring a reference to the civil court.

The bench stated that disputes over financial entitlements arising out of land acquisition must be dealt with in accordance with legal procedure. The court observed that the LAO, by apportioning the compensation without judicial oversight, had exceeded its jurisdiction and acted beyond the scope of its authority.

The judgment further referenced cases where similar disputes had arisen, reinforcing that apportionment must be handled judicially. It was observed: “The LAO’s determination of ownership shares, particularly in the presence of conflicting claims, necessitates adjudication by a competent civil court rather than by administrative order.”

The Bombay High Court quashed the LAO’s order dated March 11, 2024, to the extent that it apportioned the compensation and directed disbursal to individual partners. The LAO was instructed to refer the apportionment dispute to the Principal Civil Court at Pune within two months.

“The Civil Court must decide this apportionment dispute according to law and on its merits. The observations in this order concerning the apportionment dispute are only prima facie and in response to the contentions on behalf of the fourth and fifth respondents. The Civil Court should not be influenced by these observations while deciding the apportionment dispute.”

Additionally, the High Court ordered that upon intimation from the LAO about making the reference, the Registry should transfer the compensation amount to the Competent District Court at Pune. The amount was to be placed in an interest-bearing account pending resolution of the dispute.

The court refrained from imposing costs on the state government or LAO but observed that the fourth and fifth respondents had unnecessarily complicated the matter. However, the court chose not to impose costs on them in the interest of amicable settlement among the firm’s partners. The court noted that continued disputes between the partners could adversely affect the firm’s financial position and recommended that the parties attempt resolution through mediation.

Case Title: Pravin Girish Chamaria & Anr. v. State of Maharashtra & Ors.
Case Number: WP No. 15399 of 2024
Bench: Justice M.S. Sonak and Justice Jitendra Jain

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