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Compulsory Acquisition Schemes and Sale of Goods: A Detailed Comparison

Updated: Jun 26, 2021


The definition of Compulsory Acquisition Schemes is quite considerably wide and for the purpose of this research paper to make it more focused, the acquisition schemes shall be seen from the perspective of land acquisitions or capital acquisitions. The term Compulsory Acquisition Schemes simply means any form of transaction between the state and a citizen regarding property that the state acquires for carrying out its functions for public good. Such functions involve mostly building infrastructure. Since the statute of Sale of Goods and the Compulsory Acquisition Schemes do not bear much comparable similarities, the paper shall mainly deal with its principal differences.

Nature and Scope

The said research paper shall delve into matters regarding how compulsory acquisitions are governed, precedents which point out the nature of such acquisitions and then differentiating such acquisitions from the Sale of Goods Act1930. The paper will also deal with the question of how such contracts are valid and non-violative of the right to livelihood.

Analysis of the Issue

There are two types of contracts which can be entered into by the state. First, there are contracts which are executed under Article 299(1) of the Indian Constitution in the exercise of executive power of the Union. In these kinds of cases there is no question of ratification or estoppel. The second form of contracts arise out of statutory laws and require compliance with its various provisions.[1] The cited case dealt with the fact that Art 299(1) was not applicable in the exercise of statutory contracts providing for a liquor vending licence. Land Acquisitions would be governed by the second case and are open to ratifications by the courts and are governed by the Land Acquisitions Act 1894.

The first difference we see between Sale of Goods Act and the acquisitions is that while goods, as defined under section 7 of the Sale of Goods Act 1930 cover only movable property, the land is an immovable form of property. Any other form of movable property which the government might want to acquire shall be done through contracts and cannot be said to as compulsory acquisitions.

The second point of difference is in the form of bargain or the philosophy on payment. While in the case of Sale of Goods Act 1930,Section 9 provides the parties to decide upon a price on their own and in case of an ambiguity a reasonable price is provided to the seller. Also, Section 29 of the act states that the contract will be void in case there is high degree of ambiguity regarding its execution. Land acquisition on the other hand, as per Section 23(2) of the Land Acquisitions Act 1894states that a “solatium” of 30% or money comfort shall be given to the person as a conciliatory measure and as a compensation for finding property elsewhere[2]. Acquisitions also relies upon courts for price discovery. The court in the case of acquisitions, as per section 18 of the act, allows the collector to deposit the matter to courts. And in such cases the court sit in the armchair of a prudent purchaser and asks what a prudent vendor is going to ask for, for that piece of land[3]. The court also takes into consideration the neighborhood, the soil condition, and other advantages to determine the price according to Section 23 of the Land Acquisition Act. Coupled with the solatium, the point of payment in land acquisition is not just for the payment of the piece of land, but also for the inconvenience and compensation of losing the said piece of land and looking for another one. The involvement of courts is also more apparent in determining the price, taking out the element of bargain from the transaction. S ection 24 of the Land Acquisitions Act 1894 also guide and specify the matters the court should consider while deciding compensation such as urgency, disinclination, or any damage to the land after the notice of acquisition and any increase in value if the land is put to use by the proprietor. The payment is for compensation and not merely a consideration for the land[4].

The nature of acquisition contracts are not commercial and have to be only used for state functions. Any use opposed to public policy is strictly unlawful and the said piece of land cannot be sold off to any other nominees or sub awardees, demarcating clearly that such contracts of acquisition are of a non-commercial nature[5].

The fact that compulsory land acquisitions leave no choice regarding sale of the said piece of land and forfeiting the landis a must makes this also a question of justice and equity. While in the case of contracts, the parties’ consent to undertake the transaction is the essence of it, in cases of acquisition the seller is mostly unwilling. The constitutionality of such contracts of acquisition hold up because of Section 23 and Section 31(3) of the Land Acquisition Act 1894. The reasoning given by courts is that the right to shelter is a fundamental right evenif the right to property is not. The state because of this fact, compensates the seller in the form of a 30% solatium and other methods prescribed under section 31(3) of Land Acquisitions Act 1894, in the form of other land allotments and remissions of taxes[6].


Land Acquisition and Sale of Goods are different legislations formed for different purposes. Sale of goods act is concerned with commercial activity while land acquisition is concerned with state functions of infrastructure building. The contracts of acquisition lacks bargain and is based on the principle of compensation. Acquisition legislation ensures that the seller gets his fair share and more, but the sale of goods act governs and regulates validity of contracts made with free will and bargain among two private persons and not with the state. The sale of goods act deals only with movable property and does not include capital assets like land.

References: -

[1] State of Haryana& Ors v. Lal Chand& Ors (1984) 3 SCC 634

[2] Panna Lal Ghosh& Ors v. Land Acquisition Collector& Ors (2004) 1 SCC 467

[3] Gurlingappa and Others v. Assistant Commissioner and Land Acquisition Officer (1997) 3 SCC 627

[4] Land Acquisition Officer v. Jasti Rohini (1995) 1 SCC 717

[5] Jaipur Development Authority v. Mahesh Sharma& Anr (2010) 9 SCC 782

[6] New Reviera Co-Op. Housing Society v. Special Land Acquisition Officer (1996) 1 SCC731

Author ~ Akarshita

Co-Author ~ Divyanshu Mishra

BBA.LL.B, 2nd year

Bennett University

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