NICE Project a “Fraud on Statute”: Karnataka HC Dismisses Appeals Over Unpaid Land Compensation After 23 Years

A Karnataka High Court Division Bench has dismissed writ appeals filed by NICE and KIADB, affirming that landowners may challenge decades-long failure to pass compensation awards even after acquisition legality attained finality in the Supreme Court.

A Division Bench of the High Court of Karnataka, comprising Justice D K Singh and Justice T M Nadaf, on 29 July 2026 dismissed over a hundred writ appeals filed by Nandi Infrastructure Corridor Enterprise Limited, Nandi Economic Corridor Enterprises Limited (collectively, NICE) and the Karnataka Industrial Areas Development Board (KIADB). The appeals challenged a Single Judge order dated 4 July 2025 that had granted relief to landowners whose lands were notified for acquisition between 1998 and 2009 for the Bengaluru-Mysuru Infrastructure Corridor Project (BMICP) but in respect of whom no compensation awards had been passed even after more than two decades. The Division Bench characterised the conduct of NICE as a “fraud on the statute and Constitution” and affirmed that the prolonged failure to determine compensation constituted a continuing violation of Article 300A of the Constitution of India, giving rise to an independent cause of action distinct from the validity of the original acquisition.

The BMICP and Decades of Inaction on Awards

The BMICP was conceived as a major infrastructure project to connect Bengaluru and Mysuru through five townships, an expressway of approximately 111 kilometres, a peripheral road of approximately 41 kilometres and a link road of approximately 9.8 kilometres. For this purpose, 20,193 acres of land situated in Bengaluru Urban and surrounding areas were notified for acquisition under Section 28(1) of the Karnataka Industrial Areas Development Act (KIAD Act). Preliminary notifications were issued between 1998 and 2009; final declarations under Section 28(4) followed between 2003 and 2009.

The landowners who approached the Single Judge were not disputing the validity of these notifications. Their grievance was narrower: despite the lapse of more than 23 years since the notifications, the acquiring authorities had passed no awards determining compensation. Their lands remained locked under acquisition — they could not alienate, develop, cultivate, mortgage or otherwise deal with them — while the State had discharged none of its statutory obligations regarding compensation.

The petitioners also contended that substantial portions of the acquired lands had not been utilised for the core components of the BMICP, namely the expressway, peripheral road, link road, toll plazas and interchanges. This position, the Division Bench noted, remained substantially undisputed by the other side before the Single Judge.

Commercial Exploitation of Acquired Land

A significant part of the Division Bench's reasoning rested on financial disclosures found in NICE's own annual reports. As early as the financial year 2008–09, NICE had disclosed income from sale of land. By 2010–11, advances received towards sale of land and Joint Development Agreements appeared in its financial statements. The Annual Report for 2013–14 recorded that the company intended to mobilise financial resources through disposal of developed land parcels. During 2014–15, NICE disclosed receipts of approximately Rs 2,706.3 million from sale of developed land, as against toll collections of approximately Rs 1,879.2 million for the same year.

The court found that these were not isolated accounting entries. Across multiple financial years, sale of developed land, Joint Development Agreements and monetisation of project lands constituted recurring sources of revenue alongside toll collections. The acquired lands were also mortgaged to raise finance from banks and financial institutions and were used for residential layouts, commercial complexes, technology parks and hotels.

The bench also found that NICE had increased toll fees on various occasions without seeking prior approval of the State, in violation of the Framework Agreement (FWA). Lake and tank-bed lands of various villages had been handed over to NICE in violation of the Supreme Court's ruling in Hinchlal Tiwari v. Kamala Devi [(2001) 6 SCC 496], which had held that community resources such as tanks and ponds must be protected to maintain ecological balance and the quality of life guaranteed under Article 21.

Against this backdrop, the court recorded that out of the 111-kilometre expressway contemplated under the FWA, NICE had constructed only 5 kilometres in 25 to 26 years, a fact disclosed in an affidavit dated 28 July 2026 filed by the Additional Chief Secretary, Public Works Department. The court also noted that 554 acres of excess land had been handed over to NICE beyond what the FWA required, as disclosed in an affidavit filed on behalf of the State in Contempt Petition (Civil) No 139 of 2012 — directly contradicting NICE's contention that the government had not provided sufficient land.

Whether Earlier Supreme Court Judgments Barred the Present Challenge

NICE's central legal argument was that the writ petitions were barred by the doctrine of res judicata. The legality of the FWA, the public purpose underlying the BMICP, the acquisition notifications issued under the KIAD Act and the competence of the State Government to undertake acquisition for the project had all been upheld by the Supreme Court in State of Karnataka v. All India Manufacturers Organisation [(2006) 4 SCC 683] and in M. Nagabhushana v. State of Karnataka [(2011) 3 SCC 408]. NICE contended that these issues had attained finality and could not be re-opened.

The Division Bench accepted the general proposition that litigation must attain finality and that the Supreme Court's judgments bound all courts. However, it drew a firm distinction between the identity of parties and the identity of issues. The doctrine bars only those proceedings in which the very issue already adjudicated is sought to be re-opened. Where subsequent events give rise to an independent and distinct cause of action, the doctrine does not apply.

The court held that the earlier Supreme Court rounds had adjudicated the legality of the acquisition itself. The present proceedings raised an entirely different question: whether the acquiring authorities could leave acquisition proceedings incomplete for over two decades without passing any award. This prolonged inaction gave rise to a fresh and independent cause of action that simply could not have been adjudicated in the earlier rounds because the factual foundation had not yet arisen at that time.

The bench relied on the principle recognised in Anil Kumar Gupta that different stages of an acquisition may furnish separate and distinct causes of action. A challenge founded upon subsequent statutory defaults cannot be rejected merely because an earlier challenge to the acquisition notifications had failed.

The court further observed that if every subsequent challenge were treated as barred simply because the original acquisition had been upheld, the acquiring authority would be rendered immune from judicial scrutiny regardless of its subsequent conduct. The doctrine of finality protects judicial determinations; it does not immunise future statutory defaults or administrative inaction.

The Court's Assessment of the BMICP

The Division Bench's conclusions on the broader conduct of the project were unusually direct. It characterised the implementation as a situation where “the State is accomplice in this fraud and gross breaches and violations of the FWA.” The bench found that while the project was conceived for a public purpose, it had served primarily the private interests of the project proponents, with the lands acquired through eminent domain becoming intertwined with extensive commercial transactions extending beyond road infrastructure.

The court expressed doubt that an independent forensic audit would ever be conducted, given the State's own involvement, but observed that this was a fit case for an independent assessment and investigation by a special team of experts conducting a forensic audit of NICE's accounts. It remarked that the BMICP “may be one of the biggest scam in the State of Karnataka” and questioned why the State had not reviewed or cancelled the project given NICE's failure to develop the five townships or complete the expressway after 25 years.

The bench also noted that lakes, water bodies and tank-bed lands had been transferred to NICE, damaging the environment and ecology and affecting the water supply chain of Bengaluru, in violation of both the FWA and applicable judicial precedents.

Outcome

The Division Bench dismissed all the writ appeals filed by NICE and KIADB and affirmed the order dated 4 July 2025 passed by the learned Single Judge. All pending interlocutory applications in the connected matters were held to have not survived in view of the dismissal and were accordingly disposed of. The judgment was pronounced by Justice D K Singh on 29 July 2026, the appeals having been heard and reserved for judgment on 24 March 2026.