The Supreme Court on Wednesday tore into the Odisha government for showing "mala fide" intent and "favouritism" in granting "undue favour" to the erstwhile Vedanta Foundation by acquiring around 8,000 acres of agriculture land belonging to 6,000 families, two rivers and land abutting a wildlife sanctuary near Puri for a university.

A bench of Justices M.R. Shah and Krishna Murari said the state government violated the “doctrine of public trust” by permitting the acquisition of the Nuanai and Nala rivers, which would adversely affect hundreds of families.

“It is not appreciable why the government offered such an undue favour in favour of one trust/ company. Thus, the entire acquisition proceedings and the benefits which were proposed by the state government were vitiated by favouritism and violative of Article 14 (right to equality) of the Constitution of India," the court said.

"The (appeal by the Anil Agarwal Foundation, formerly the Vedanta Foundation) same deserves to be dismissed and are accordingly dismissed with costs, which is quantified at Rs 5 lakh to be deposited by the appellant — beneficiary company Anil Agarwal Foundation — with the registrar of this court within a period of six weeks from today...,” Justice Shah, who authored the judgment, observed.

The court said the state had extended “undue benefits” and “undue largesse” for the following reasons:

◉ By granting total autonomy to the proposed Vedanta University with regard to administration, admission, fee structure, curriculum and faculty selection

◉ Giving the proposed varsity complete immunity from any reservation laws of the state government

◉ All assistance in getting regulatory approvals from the UGC and the AICTE

◉ The government agreeing to provide a four-lane road from Bhubaneswar city to the site of the proposed varsity

◉ The government agreeing to make the land use/ zoning plan within a 5km radius of the university only after consultation with Vedanta

◉ The government promising to exempt all state levies, taxes and duties such as VAT, works contract tax, stamp duty and entry tax on research and development equipment, educational aids, lab equipment and tools, and construction materials from the date of signing of the MoU

◉ The government pledging to assist the Foundation in obtaining a no-objection certificate from the State Pollution Control Board and all clearances from the Centre

◉ The government promising to assist the Foundation in arranging rapid environmental impact assessment for the project

◉ The government pledging to provide extraordinarily huge amounts of electricity and water.

The bench passed the judgment while dismissing a batch of appeals filed by the Foundation and its owning group challenging an Orissa High Court judgment that on November 16, 2010, quashed the acquisition proceedings on the ground that it was vitiated by mala fide exercise of power by the state to acquire the land and hand it over to Vedanta, which had claimed to have converted itself into a public limited company despite being a private company.

Vedanta Resources Ltd had initially applied to the state for the acquisition of 15,000 acres to set up a university in Odisha “to impart education in undergraduate and postgraduate courses in engineering, medicine, management, general science and humanities". The company had given a presentation to the chief minister in April 2006 after selecting the site on the outskirt of Puri on the Puri-Konark Marine Drive.

That Vedanta Foundation changed its name to Anil Agarwal Foundation and obtained a fresh certificate of incorporation from the Registrar of Companies on September 6, 2006.

The state had initiated the acquisition proceedings for 6,917.63 acres by issuing notifications under the Land Acquisition Act between December 13, 2006, and August 21, 2007.

Orissa High Court, acting on a batch of petitions filed by aggrieved land owners, quashed the acquisition proceedings.

Rejecting the Foundation’s argument that the high court had passed an erroneous order, Justice Shah observed that the state government had acquired for the proposed university land in a "prime location just adjacent to a wildlife sanctuary" and two small rivers that flow through the area.

"The manner in which the state government has dealt with and acquired the agricultural lands belonging to 6,000 families and as it in fact favoured the private limited company, which was subsequently alleged to have been converted to a public company and that too without holding any proper inquiry to the need etc., we are of the opinion that the high court has rightly entertained the writ petitions including the public interest litigation petitions and merely because some persons did not file the objections under Section 5A and/or accepted a meagre compensation and/or even accepted the compensation cannot be a ground to set aside the acquisition proceedings, which as such rightly observed by the high court, is vitiated by not following the statutory provisions..."

The apex court said the entire land acquisition proceedings, right from the selection of the plot, had been done by the company, and not by the state government.

“Even otherwise the subsequent alleged conversion from private company to public company was an attempt to get out of the statutory provision under the (Land Acquisition) Act, 1894. The law department specifically observed that the land cannot be acquired by a private company for the purposes for which the lands were sought to be acquired, only thereafter the appellants changed the status of the company from private company to public company. The aforesaid was a mala fide exercise on the part of the appellants,” Justice Shah observed.

“The most important aspect which is required to be considered is the non-application of mind by the state government on environmental aspects and passing of two rivers from the acquired lands in question. It is not in dispute that from the lands in question two rivers namely ‘Nuanai’ and ‘Nala’ are flowing, which as such were acquired by the state government. How the maintenance of the rivers, etc. can be handed over to the beneficiary company? If the lands in question are continued to be acquired by the beneficiary company, the control of the rivers would be with the said private company, which would violate the Doctrine of Public Trust. Even requiring the beneficiary company to maintain the flow of the two rivers may also affect the residents of the locality at large,” Justice Shah remarked.

He added: “It is also required to be noted that just across the road, there is the (Balukhand) wildlife sanctuary.... Therefore, the large-scale construction for the establishment of the proposed university as observed by the high court will also adversely affect the wildlife sanctuary, the entire ecosystem and the ecological environment in the locality. It is a duty of the State to protect the wildlife sanctuary.”

The Supreme Court said the government ought to have dealt with agricultural landowners in accordance with the law.

"The state government could not have considered the proposal from only one beneficiary/ trust. There may be other public trusts/ companies who might be interested in establishing such university. Even no proper inquiry seems to have been initiated by the government/ collector while considering the proposal by the beneficiary company," the top court said.