Can Liability for Enhanced Land Acquisition Compensation Be Shifted to a Transferee in View of a Scheme of Arrangement and Tripartite Agreement When the Proceedings Arose Before the Effective Date? Clarification and Reaffirmation of Law by the Himachal Pradesh High Court – Precedent Confirmed on Scope of Liability Transfer in Civil Execution under Article 227

The Himachal Pradesh High Court held that, where a scheme of arrangement and tripartite agreement clearly restricts transfer of pre-effective date litigation or contingent liabilities, liability for enhanced land acquisition compensation arising from proceedings initiated before the transfer date remains solely with the original beneficiary (here, Jaiprakash Associates Ltd.), not the transferee (UltraTech Cement Ltd.). The Court reaffirmed and followed Supreme Court precedent, clarifying the limits of liability transfer in asset/business transfers, with direct guidance for execution courts and parties in similar land acquisition and corporate restructuring contexts.

Summary

Practical Impact

What’s New / What Lawyers Should Note

• The Court unequivocally holds that post-transfer liability for enhanced compensation in land acquisition remains with the transferor when proceedings commenced prior to the effective date, where the scheme/tripartite agreement so provides.
• The earlier letter suggesting transfer of “all liabilities” is superseded by the later, contractually-binding tripartite agreement.
• Payments made by the transferee towards supplementary awards or after the effective date do not amount to legal assumption of pre-transfer liabilities.
• The scope of Article 227 is strictly limited—interference is not warranted when the execution court acts in line with Supreme Court-recognized contractual and statutory frameworks.
• IBC moratorium bars execution against the transferor, but cannot be used to shift liability artificially to a non-consenting transferee.
• Lawyers should carefully analyze the text of both the “scheme of arrangement” and any tripartite/transfer agreements to assess the true locus of contingent/pre-existing liabilities in similar cases.

Summary of Legal Reasoning

1. Origin of Liability: The award of enhanced compensation resulted from proceedings commenced and awards passed prior to the effective date of the transfer to UltraTech.
2. Interpretation of Transactional Documents: The scheme of arrangement (approved by NCLT) and tripartite agreement, both post-dated an earlier “all liabilities” letter, and together clearly stipulated that pre-transfer litigation/liability remains with JAL.
3. Supreme Court Precedent: SC in M/s Ultra-Tech Cement Ltd. vs. Mast Ram and Others (2024) directly interpreted these documents, holding that “all litigations and proceedings initiated before the effective date remain with JAL, not UltraTech.”
4. Nature of Contingent Liabilities: Even where compensation was not crystallized as on the effective date, the resulting contingent liability remained within the allocation for pre-transfer liabilities.
5. IBC Proceedings: The moratorium under section 14 IBC applies to execution against JAL, but does not provide a legal basis for shifting liability to UltraTech in contradiction to the scheme/agreement.
6. Payments by UltraTech: Respondent UltraTech’s payment of supplementary awards post-transfer does not alter the contractual and legal liability structure.
7. Article 227 Review: The High Court reaffirmed the narrow scope of interference under Article 227—error correction, reappreciation of evidence, or substitution of findings is not permitted absent grave dereliction or patent illegality.
8. Asset Schedule: The lands/assets underlying the compensation did not form part of the asset schedule transferred to UltraTech, as confirmed by the Supreme Court.
9. Conclusion: The execution court was correct in fastening liability exclusively on JAL. The petition to shift liability to UltraTech was thus dismissed, with all other related proceedings similarly resolved.

Arguments by the Parties

Petitioner

• Sought to modify the execution court’s order to fasten liability for enhanced compensation on UltraTech, not JAL.
• Cited an official letter and the tripartite agreement, arguing that liabilities (declared/undeclared) ostensibly transferred to UltraTech by administrative/contractual process.
• Pointed to UltraTech’s payment of supplementary compensation post-transfer as supporting its responsibility.

Respondent UltraTech Cement

• Denied that any award or acquisition order had been passed against it.
• Emphasized that under both scheme of arrangement and tripartite agreement, liability was not transferred to UltraTech.
• Cited Supreme Court and NCLT-approved scheme language stating that pre-transfer litigation/liability remains with JAL.
• Asserted that any payment made by UltraTech did not amount to legal assumption of liability for earlier awards.

Respondent JAL

• Noted pendency of its appeal against the reference award.
• Asserted inability to pay enhanced compensation due to insolvency proceedings and IBC moratorium.
• Stated that any liability to pay is subject to the scheme/arrangement approved during transfer of the business/assets.

Factual Background

Land in Village Samtyari was acquired in 2008 for mining/cement plant operations by JAL. The Land Acquisition Collector awarded compensation, which was later enhanced by a reference court order in June 2017. The cement plant and mining business were transferred by JAL to UltraTech via a scheme of arrangement and tripartite agreement, effective June 2017. JAL failed to deposit the enhanced compensation; petitioners sought to execute the award against UltraTech, relying on transfer documents. JAL entered insolvency in 2024, invoking a Section 14 IBC moratorium. The execution court had earlier declined to shift liability to UltraTech. Petitioners then invoked Article 227 jurisdiction.

Statutory Analysis

• Article 227 Constitution of India: Court reaffirmed its limited scope—supervisory (not appellate) jurisdiction, not to substitute findings unless grave legal error exists.
• Land Acquisition Act: Examined whether liability to pay enhanced compensation (arising from reference awards under s. 18/54) could transfer via scheme/agreement.
• IBC Section 14: Moratorium against legal proceedings/execution against a company in insolvency; does not shift liability to third-party transferees unless contract or law specifically so provides.
• Companies Act: Considered provisions relating to binding nature and effect of court/NCLT-sanctioned arrangements and schemes.

Alert Indicators

• ✔ Precedent Followed – Existing Supreme Court and statutory law affirmed.

Citations

• 2025:HHC:29847 (Neutral Citation)
• M/s Ultra-Tech Cement Ltd. vs. Mast Ram and Others (Supreme Court, 2024)
• Sadhana Lodh v. National Insurance Co. Ltd., (2003) 3 SCC 524
• Garment Craft v. Prakash Chand Goel, (2022) 4 SCC 181
• Kolkata Municipal Corporation v. Bimal Kumar Shah, (2024) 10 SCC