The Land Acquisition Bill is slated to be taken up for consideration and passing in the Lok Sabha today. The government had circulated an amendment list in the last session of Parliament. In a column in the Financial Express, MR Madhavan discusses the major features of the Land Acquisition Bill and the associated issues that Parliament may need to consider while deliberating on the Bill. Economic growth and job creation require efficient usage of land resources. It is important that a fair and transparent process for purchase and for acquisition of land is followed. For the purchase of land, a key concern is the authenticity of land titles, and the government has drafted a Land Titling Bill for this purpose. In the case of land acquisition, the following questions need to be addressed. What are the end-uses for which public interests will trump private property rights, and justify acquisition of land from a person who is not willing to part with it? What should be the process followed? Since there is no market mechanism of discovery of prices in these cases, how should compensation be computed? Is there a need to address non-land owners who may be displaced by the acquisition process? Does the acquisition process get completed in a reasonable amount of time, and is there finality to the acquisition? In sum, do both sides—the acquirer and the land owner—perceive the process to be fair? The current Bill addresses these questions in the following manner. It defines public purpose to include infrastructure projects (as defined by the finance ministry, with some exclusions); projects related to agriculture, agro-processing and cold storage; industrial corridors, mining activities, national investment and manufacturing zones; government administered or aided educational and research institutions; sports, healthcare, transport and space programmes. It also enables the government to include other infrastructural facilities to this list after tabling a notification in Parliament. The significant difference from the current Land Acquisition Act, 1894, is that land cannot be acquired for use by companies unless they satisfy any of the above end-uses. The Bill includes a requirement for consent of the land owners in some cases. If the land is acquired for use by a private company, 80% of land owners need to give consent. If it is for use by a public private partnership (PPP), 70% of the land owners have to agree to the acquisition. The rationale of having differential consent requirements based on ownership—including the lack of any such requirement if the land is for the use of the government or a public sector undertaking—is not clear. Why should a land owner, who is losing his land care, whether the intended project is to be executed by the government or a private company? The Bill specifies that the compensation will be computed in the following manner. Three factors are taken into account: the circle rate according to the Stamp Act; the average of the top 50% of sale deeds registered in the vicinity in the previous three years; the amount agreed upon, if any, in case of purchase by a private company or PPP. The higher of these three amounts is multiplied by a factor, which varies from 1 in urban areas to a number between 1 and 2 in rural areas, depending upon the distance from the urban centre. To this amount, the value of any fixed assets such as buildings, trees, irrigation channels etc is added. Finally, this figure is doubled (as solatium, i.e. compensation for the fact that the transaction was made with an unwilling seller). The justification given for the multiplier ranging from 1 to 2 is that many transactions are registered at a price significantly lower than the actual value in order to evade taxes—the moot question is whether such under-reporting is uniform across the country? The Bill states that all persons who are affected by the project should be rehabilitated and resettled (R&R). The R&R entitlements for each family includes a house, a one-time allowance, and choice of (a) employment for one person in the project, (b) one-time payment of R5 lakh, or (c) inflation adjusted annuity of R2,000 per month for 20 years. In addition, the resettlement areas should have infrastructure such as a school, post office, roads, drainage, drinking water, etc. The process has several steps. Every acquisition, regardless of size, needs a social impact assessment, which will be reviewed by an expert committee, and evaluated by the state government. Then a preliminary notification will be issued, land records will be updated, objections will be heard, rehabilitation and resettlement survey carried out, and a final declaration of acquisition issued. The owners can then claim compensation, the final award will be announced, and the possession of the land taken. The total time for this process can last up to 50 months. The big question is whether this time frame would hinder economic development and the viability of projects? The Bill provides for an Authority to adjudicate disputes related to measurement of land, compensation payable, R&R etc, with appeals to be heard by the High Court. There are several restrictions on the land acquired. The purpose for which land is acquired cannot be changed. If land is not used for five years, it would be transferred to a land bank or the original owners. Transfer of ownership needs prior permission, and in case of transfer in the first five years, 40% of capital gains have to be shared with the original owners. Recent cases of land acquisition have been followed by public protests, and the stalling of the acquisition. Whereas some of these may be driven by political agendas, the old Act was perceived to be unfair to land owners in several ways. The challenge for Parliament is to examine the new Bill and craft the law in such a way that it is fair (and perceived as such) to land owners, while making acquisition feasible and practical for projects that are required for economic development and other areas of public interest.
The Specified Bank Notes (Cessation of Liabilities) Bill, 2017 is being discussed in Parliament today.[1] The Bill replaces an Ordinance promulgated on December 30, 2016 to remove the Reserve Bank of India’s (RBI) liability and central government’s guarantee to honour the old Rs 500 and Rs 1,000 notes which were demonetised on November 8, 2016 through a notification.[2] These notes were allowed to be deposited in banks by December 30, 2016. In light of this, we explain the provisions of the Bill and possible implications.
What does the Bill say?
Under the RBI Act, 1934, RBI is responsible for issuing currency notes, and is liable to repay the holder of a note upon demand. The Bill provides that, from December 31, 2016, RBI would no longer be liable to repay holders of old notes of Rs 500 and Rs 1,000, the value of these notes.[3] Further, the old notes will no longer be guaranteed by the central government.
Can a person keep old notes?
A person will be prohibited from holding, transferring or receiving the old notes from December 31, 2016 onwards. It exempts some people from this prohibition including: (i) a person holding up to 10 old notes (irrespective of denomination), and (ii) a person holding up to 25 notes for the purposes of study, research or numismatics (collection or study of coins or notes).
What happens if a person continues to hold old notes after December 30, 2016?
Any person holding the old notes, except in the circumstances mentioned above, will be punishable with a fine: (i) which may extend to Rs 10,000, or (ii) five times the value of notes possessed, whichever is higher.
Are there any issues with this provision?
There may be two issues.
No window to deposit old notes before imposing penalty: The notification of November 8th allowed old currency notes to be deposited till December 30, 2016 and specified that people unable to deposit them till this date would be given an opportunity later.2 However, the Ordinance which came into force on December 31, 2016 made it an offence to hold old currency notes from that day onwards and imposed a penalty. This overnight change did not provide a window for a person holding the notes on that day to exchange or deposit them. Therefore, not only did the holder lose the monetary value of the notes but he was also deemed to have committed an offence. This implies that a person who had the notes did not have an opportunity to avoid committing an offence and attracting a penalty.
Unclear purpose behind penalty on possessing old notes: The purpose and the objective behind imposing a penalty for the possession of old currency notes is unclear. One may draw a comparison between holding an invalid currency note, and an expired cheque since both these instruments are meant to complete transactions. Currently, a cheque becomes invalid three months after being issued. However, holding multiple expired cheques does not attract a penalty.
Is it still possible to deposit old notes?
The government has specified a grace period under the Bill to allow: (i) Indian residents who were outside India between November 9, 2016 to December 30, 2016 to deposit these notes till March 31, 2017, and (ii) non-residents who were outside India during this period to deposit notes till June 30, 2017. The government may exempt any other class of people by issuing a notification. In addition, RBI has permitted foreign tourists to exchange Rs 5,000 per week. No other person can exchange or deposit old notes after December 30, 2016.
Would this satisfy Constitutional norms?
While the notification issued on November 8 specified that after December 30, 2016, any person unable to exchange or deposit old notes would be allowed to do so at specified RBI offices, the Bill does not provide such a facility except in the circumstances discussed above.
On may question whether this violates Article 300A of the Constitution, which states that no person will be deprived of his property except by law. Though this Bill will be a “law”, one may want to think about whether its provisions meet the standards of due process and are not arbitrary. Given that earlier notifications had indicated that a facility for exchanging or depositing old notes would be provided after December 30, 2016, would the action of not providing such facility under the Bill qualify as an arbitrary action which violates due process? [4] A few examples will be useful in examining this question.
Case 1: A person unable to deposit notes due to poor health
A person may have been unable to deposit old currency notes owing to various reasons such as poor health, old age or disability till the deadline of December 30, 2016. The Bill does not provide any facility for such persons to deposit old notes, except if they were not in India during the period between November 8 and December 30, 2016.
Case 2: A person without a bank account
A person without a bank account may have held over Rs 4,500 in old currency notes. The notification (and future modifications) allowed a person to exchange up to Rs 4,500 over the counter once till November 24, 2016.[5] Such a person would have to incur a monetary loss if he possessed old notes above this value, given his inability to deposit them in a bank account.
Case 3: Indian citizens living abroad
There may be Indians working or studying abroad holding old currency notes. The government has notified the last date for depositing old notes for these non-resident Indians as June 30, 2017.[6] However, these people may not visit India between November 8, 2016 and June 30, 2017. In such a scenario, these people may have to incur a monetary loss.
Case 4: Foreign nationals entering India before demonetisation
Foreign tourists in the country may have held old currency notes before demonetisation on November 8, 2016. Such tourists can only exchange old currency notes of up to Rs 5,000 per week till January 31, 2017.[7] Given that such foreigners may not have bank accounts in India, they may also suffer a monetary loss for whatever amount could not be exchanged within the period they were in India. For example, a person who had Rs 10,000 and left India on November 13, 2016 would not have been able to get the value of notes they had, over Rs 5,000.
In addition, Indian currency notes are used legally in neighbouring countries such as Nepal and Bhutan. The Bill allows only Indian citizens to deposit old notes for an extended period under certain conditions. However, it does not make any provisions for foreigners to deposit or exchange old notes held by them. Such foreign nationals who are not Indian residents would not have bank accounts in India.
[1] The Specified Bank Notes (Cessation of Liabilities) Bill, 2017,http://www.prsindia.org/uploads/media/Specified%20Bank%20notes/specified%20bank%20notes%20bill%202017-compress.pdf.
[2] S. O. 3407 (E), Gazette of India, Ministry of Finance, November 8, 2016, http://finmin.nic.in/172521.pdf.
[3] The Specified Bank Notes (Cessation of Liabilities) Ordinance, 2016,http://www.prsindia.org/uploads/media/Ordinances/Specified%20Bank%20Notes%20%28Cessation%20of%20Liabilities%29%20Ordinance,%202016.pdf.
[4] Section 2 (ix) of the notification issued on November 8, 2016 (No. S. O. 3407 (E)) states that any person who is unable to exchange or deposit the specified bank notes in their bank accounts on or before the 30th December, 2016, shall be given an opportunity to do so at specified offices of the Reserve Bank or such other facility until a later date as may be specified by it.
[5] S. O. 3543 (E), Gazette of India, Ministry of Finance, November 24, 2016, http://finmin.nic.in/172740.pdf.
[6] S. O. 4251 (E), Gazette of India, Ministry of Finance, December 30, 2016,http://dea.gov.in/sites/default/files/24Notification%2030.12.2016.pdf.
[7] Exchange facility to foreign citizens, January 3, 2017, https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=10815&Mode=0.
