Panchayat Is State Under Article 12 – Reservation of Land for Panchayat Income Is State Acquisition Requiring Compensation: Supreme Court

“Labeling Land for Panchayat Income Is Still Acquisition by the State”—Supreme Court Declares Haryana's Attempt to Capture Bachat Land Without Compensation Unconstitutional. In a defining interpretation of constitutional protections against arbitrary acquisition, the Supreme Court of India ruled that land reserved for Panchayat income or development must be treated as acquired by the ‘State’ under Article 12, and therefore subject to the rigours of Article 31-A and Article 300-A of the Constitution.

Crucially, the Court declared that even when title appears to remain with the original proprietors, if the land is reserved for Panchayat’s financial or administrative purposes under a consolidation scheme, it constitutes an acquisition by the State, and compensation is not optional—it is mandatory.

“The reservation of land for Panchayat income purposes under the consolidation scheme is for the benefit of the State… and, therefore, such reservation amounts to acquisition under Article 31-A attracting its protection and limitations,” held the Bench comprising CJI B.R. Gavai, Justice Prashant Kumar Mishra, and Justice K.V. Viswanathan.

“Panchayats Are Not Private Collectives, They Are Constitutionally Recognized ‘State’ Bodies” – Court Applies Article 12 to Local Bodies

Rejecting the State of Haryana’s argument that vesting land in Panchayat was not a ‘State acquisition’, the Court clarified:

“It is now beyond dispute that the Gram Panchayat is ‘State’ within the meaning of Article 12 of the Constitution… A reservation for its benefit is, therefore, to be treated as an acquisition by the State.”

The Court reinforced the principle that local bodies, when exercising statutory powers and acquiring property—even indirectly—stand in the shoes of the State. The Panchayat, though rural and local in form, operates as an organ of the State machinery, and cannot claim immunity from constitutional scrutiny.

“Reservation for Income-Generating Purposes Is Not Public Use—It’s Revenue for the State”

A striking facet of the judgment is its treatment of reservations made during consolidation for the Panchayat’s financial gain. The State argued that Section 18(c) of the Consolidation Act permitted such reservation for the Panchayat’s income. The Court pushed back:

“Reservation solely for income of the Panchayat has no nexus to a specific public purpose like roads or schools… such reservation amounts to acquisition of land for the State’s economic benefit, which squarely attracts the second proviso to Article 31-A.”

In other words, “revenue-based reservation” is not a cloak for “public interest”. The Constitution draws a sharp line: benefit to the State requires just compensation if property is taken.

This distinction reinforces the idea that public purpose must involve genuine community utility, not merely institutional enrichment of government entities.

“Post-Consolidation Vesting Without Compensation Is a Constitutional Offence” – Court Declares Haryana Amendment Invalid as Applied to Unused Land

The Haryana government had enacted Act No. 9 of 1992, inserting a wide definition of ‘shamilat deh’ under Section 2(g) of the Punjab Village Common Lands (Regulation) Act, 1961. It retrospectively included any land recorded as “jumla malkan wa digar haqdaran arazi”, “mushtarka malkan”, or similarly worded categories, regardless of usage.

The Supreme Court warned against such legislative overreach: “A legislative device that enables the State to take over property without use, assignment, or compensation cannot survive Article 31-A's constitutional scrutiny.”

The Court held that the ‘explanation’ inserted by the amendment could not nullify the requirement of compensation where acquisition is substantively for the benefit of the State or its instrumentalities.

“Retention of Title Does Not Excuse the State From Paying Compensation” – Substance Over Form Doctrine Applied

A powerful doctrinal takeaway from the judgment is the application of the substance over form principle. Haryana argued that title of the land technically remained with the proprietors, and so no “acquisition” occurred.

The Court rejected this logic entirely: “If the entire bundle of rights—use, possession, income—is taken by the State or its organs, then acquisition occurs regardless of nominal title.”

The Bench reaffirmed the settled rule that constitutional protection under Article 31-A is engaged not just when ownership formally changes hands, but when substantive rights are extinguished or transferred for State benefit.

This interpretation prevents the State from sidestepping compensation obligations through legal fiction or procedural maneuvering.

Legislative Evasion of Constitutional Property Protections Will Not Be Tolerated

The Supreme Court’s verdict not only protects the proprietary rights of landowners in Haryana’s villages, but also establishes a broader principle: constitutional limitations on State power over land remain fully enforceable, even against rural or quasi-public institutions like Panchayats.

By declaring that reservation of land for Panchayat income equates to State acquisition, the Court has made clear: “Compensation is not a matter of administrative discretion—it is a constitutional imperative.”

Date of Decision: 16 September 2025