22 June 2012 Last updated at 06:15 ET

India court says reclaiming Tata Nano land 'illegal'

Tata Motors was forced to abandon its Nano plant in 2008 after violent protests by villagers

A court in India has overturned West Bengal government's decision to reclaim land leased to Tata Motors to set up a factory to build its low-cost Nano car.

The state passed legislation last year to return the land to farmers who had not accepted compensation.

The Calcutta High Court has now ruled that the legislation is "illegal and unconstitutional".

The state government has two months to challenge the decision in the Supreme Court.

Kalyan Banerjee, an MP of the governing Trinamool Congress (TMC) party, confirmed that the state government would appeal.

The High Court ruled on Friday that the legislation was unconstitutional because the state government had not sought the consent of India's president, which was a legal requirement.

The farmland in Singur, near Calcutta, was acquired by the state's former Communist government in 2006.

The decision to lease the land to Tata Motors led to violent protests and the company eventually pulled out of the project in 2008 but kept the land. Production of the Nano was moved to Gujarat.

After the Communists lost the state assembly election in 2011, new Chief Minister Mamata Banerjee took over the land to return it to its original owners.

Tata Motors challenged the government order in the high court which ruled last September that the government had acted legally.

Correspondents say Friday's high court order, which overturns the earlier ruling, is a major setback to the Mamata Banerjee government.

Forced acquisition of land has become a huge political issue in India where the government needs land for development projects, but farmers say that cannot happen at their expense.