Karnataka HC Quashes KIADB Land Acquisition for Private Exhibition Body, Holds It a Fraud on Statute
A Division Bench of the Karnataka High Court has quashed acquisition of farmland near Bengaluru initiated under the KIAD Act for a profitable private industry association, finding no award passed in 14 years and no genuine public purpose.
The High Court of Karnataka has quashed land acquisition proceedings initiated by the Karnataka Industrial Areas Development Board (KIADB) to acquire approximately 17.38 acres of agricultural land in Madanayakanahalli village, Bengaluru, for the benefit of the Indian Machine Tools Manufacturers Association (IMTMA). The Division Bench of Justice D K Singh and Justice T M Nadaf, deciding a batch of twelve writ appeals arising from a common Single Judge order of 20 June 2013, held that acquiring land under the Karnataka Industrial Areas Development Act, 1966 (KIAD Act) for a private, profit-making entity constitutes a colourable exercise of the power of eminent domain and a fraud on the statute and the Constitution. The bench also found that no compensation award had been passed for 14 years after the final notification, independently rendering the proceedings unsustainable.
The Acquisition and the Dispute Before the Court
IMTMA is a charitable company registered under Section 25 of the Companies Act, 1956 (now Section 8 of the Companies Act, 2013). It operates the Bangalore International Exhibition Centre (BIEC) on land originally transferred to it from Nandi Infrastructure Corridor Enterprises (NICE) pursuant to a State Government order dated 18 September 2003. Over time, IMTMA expanded the BIEC footprint to 73 acres and 14 guntas through a combination of NICE transfers and private purchases.
Seeking further expansion for a multi-level car parking facility, IMTMA requested the State Government to acquire lands in Survey Nos. 18/316, 18/317, 68, 69, 70 and 71 of Madanayakanahalli village, measuring 23 acres 38 guntas in total. The State accepted the request. A preliminary notification under Section 28(1) of the KIAD Act was issued on 19 August 2010. Landowners filed objections. After considering those objections, a final notification under Section 28(4) of the KIAD Act was issued on 2 May 2012, restricting the acquisition to 17.38 acres.
The affected landowners — including members of the Thimmaiah family from Srikantapura village, the Suresh Chandra Gupta family from Yelahanka, and Shanthappa and others from Benson Town — challenged the acquisition in separate writ petitions before the Single Judge. The Single Judge, by the impugned order of 20 June 2013, upheld the acquisition only to the extent of 7 acres, observing that NICE had undertaken to provide 5 acres free of cost for parking and that IMTMA had already agreed to purchase 7 acres from a private seller at market value. The Single Judge set aside the rest of the acquisition, but did not specify the survey numbers of the 7 acres upheld.
All three sets of parties — the landowners, KIADB, and IMTMA — filed writ appeals against that order, producing the batch of twelve appeals decided on 3 June 2026.
The Court's Inquiry on Land Holdings and Compensation
Before reserving the appeals for judgment, the Division Bench passed a detailed order on 26 March 2026 directing KIADB and IMTMA to place on record their precise stand on several factual questions: the total extent of land already in IMTMA's possession, whether IMTMA genuinely required the disputed 7 acres or more, and whether IMTMA was willing to pay compensation at present market rates given that no award had been passed and no compensation deposited despite the absence of any interim order restraining KIADB from doing so. The bench also directed the State Government to clarify whether the land in question fell within the prohibited distance of 75 metres from a waterbody.
In compliance, IMTMA filed an affidavit of its Secretary, Director General and CEO confirming that IMTMA had acquired title to 73 acres 14 guntas of land. The bench noted that IMTMA's financial statements for the years 2019–20 to 2023–24 showed the company was in substantial profit and was capable of acquiring land through private negotiations. It was also undisputed that no award had been passed and no compensation paid to any landowner in the 14 years since the final notification of 2 May 2012.
Whether Acquisition for a Private Entity Is Permissible Under the KIAD Act
The bench examined the objects and reasons of the KIAD Act, which state that the legislation is intended for the “orderly establishment and development of industries in suitable areas in the State” and for making land available for establishment of industries. Section 13 of the KIAD Act empowers the Board to promote and assist in the rapid and orderly establishment, growth and development of industries and to provide industrial infrastructural facilities in industrial areas.
The bench held that the KIAD Act contemplates acquisition of land to set up industrial areas, after which the Board may allot plots to applicants for establishing industries. The Act does not contemplate acquiring land for an individual entity. Acquiring land for a profit-making entity for its expansion is not in line with the objects of the KIAD Act. The bench characterised such an exercise as “a fraud committed on statute by the authorities to divest the landowners from their land holdings for a pittance in favour of a private entity for expansion of its business.”
Section 28(1) of the KIAD Act permits acquisition only for the purpose of development by the Board or for any other purpose in furtherance of the objects of the Act. The bench held that if land is not acquired for either of those purposes, the acquisition is a mala fide and colourable exercise of power and a fraud on the statute and the Constitution in exercising the power of eminent domain.
Article 300A, Public Purpose, and the Seven Sub-Rights
The bench placed the acquisition against the constitutional framework of Article 300A, which provides that no person shall be deprived of property except by authority of law. Drawing on the Supreme Court's decision in K.T. Plantation Private Limited v. State of Karnataka ([2011] 9 SCC 1), the bench reiterated that the right to compensation is inbuilt in Article 300A and that deprivation of property for private interest is unlawful and amenable to judicial review.
The bench also applied the seven sub-rights articulated by the Supreme Court in Kolkata Municipal Corporation v. Bimal Kumar Shah ([2024] 10 SCC 533): the right to notice, the right to be heard, the right to a reasoned decision, the duty to acquire only for public purpose, the right to fair compensation, the right to an efficient and expeditious process, and the right of conclusion. The bench held that non-compliance with these rights amounts to violation of Article 300A as being without the authority of law.
The bench drew on Sooraram Pratap Reddy v. District Collector, Ranga Reddy District ([2008] 9 SCC 552) for the proposition that where the power of eminent domain is exercised mala fide, for collateral purposes, or where the so-called purpose is no public purpose at all and fraud on statute is apparent, a writ court has jurisdiction to interfere. It also relied on Royal Orchid Hotels Limited v. G. Jayaram Reddy ([2011] 10 SCC 608), where the Supreme Court held that acquisition ostensibly for public use but diverted to private beneficiaries constitutes fraud on the power of eminent domain.
The bench stated that the State may exercise eminent domain for a private entity only when there is a genuine public purpose and the cost of acquisition, including compensation, is borne by the State or from public funds. In the present case, the acquisition was for IMTMA's own expansion of a commercial exhibition facility, and the financial capacity of IMTMA to purchase land privately was not in dispute. The bench found the entire exercise vitiated under the constitutional scheme.
Lapse Due to Non-Payment of Compensation for 14 Years
Independently of the public purpose question, the bench held that the land acquisition proceedings had lapsed. No award had been made determining compensation in the 14 years since the final notification under Section 28(4) of the KIAD Act was issued on 2 May 2012. There was no interim order in place restraining KIADB from passing an award or depositing compensation. The bench found no justification for the prolonged inaction.
Section 29 of the KIAD Act places a statutory and constitutional obligation on the State Government to pay adequate compensation for acquired land. The bench held that the failure to pass an award or pay any compensation, combined with the absence of any legal impediment to doing so, rendered the proceedings independently unsustainable.
Outcome
The Division Bench allowed the writ appeals filed by the landowners and dismissed the writ appeals filed by KIADB and IMTMA. The judgment and order of the Single Judge dated 20 June 2013 was set aside in its entirety. As a consequence, the writ petitions filed by the landowners were allowed and the acquisition notifications were quashed. No order as to costs was made. All pending interlocutory applications in the batch were disposed of as not surviving.