The retraction was preceded by a shouting match between Finance Minister Pranab Mukherjee and Railway Minister Mamata Banerji, who had threatened to walk out of a Cabinet meeting protesting some provisions in the Bill earlier this month.
Congress President Sonia Gandhi had to act as an umpire at the informal meeting that took place in Parliament during a break.
The bone of contention was the fact that one of Banerji's colleagues in the Trinamool Congress, the Congress' largest ally in the United Progressive Alliance, relayed her objections to the press.
A furious Mukherjee thumped his desk and asked, "Why did Shishir Adhikary disclose your objections to the press?" (Adhikary is also a junior rural development minister). Banerjee retorted that he had done the right thing.
Given these sharp differences between two senior ministers, Gandhi intervened and suggested the UPA discuss the contentious amendments again and that the Bill would be tabled only after a consensus.
Within minutes of this meeting, the Lok Sabha secretariat issued instructions to all the relevant sections of Parliament that the copy of the Land Acquisition (Amendment) Bill 2009 should be withdrawn and that "no further action" was to be taken on the Bill.
"There is some confusion over the land Bill, so we have stopped circulating it," a senior office in the legislative wing of the Lok Sabha confirmed to Business Standard. All Bills to be introduced in Parliament are circulated to MPs at least 48 hours in advance.
Both Congress and Trinamool sources said the land Bill and the Rehabilitation and Resettlement Bill - both aimed to ease theland acquisition process and secure a better deal for farmers and other land-losers - are unlikely to be placed in Parliament during the current session that ends on Friday.
But a section of the Congress is still trying to find a face-saving solution with the Trinamool. Late-night meetings between the two sides are not ruled out but the Trinamool camp is confident it will not allow the Bill to be tabled in its current form.
At the heart of the problem is a clause that allows the government to acquire up to 30 per cent of the land after private players buy the remaining 70 per cent to meet contiguity requirements.
The Trinamool wants at least four changes. One, landowners should have a legal right to buy back their land if the proposed project doesn't take off within the stipulated time. Two, the government should not play a role in acquiring land to set up private projects. Three, no industry should come up on agricultural land. Four, land cannot be acquired forcibly against farmers' wishes.
Adhikary told friends that he had tried to reason with his senior colleague, Union Rural Development Minister C P Joshi (a Congressman), to take Banerjee's views on board. But the Bill that the government sought to introduce was identical to the 2007 version, drafted before Banerjee joined the UPA.
"Mamata Banerjee's sentiments about land and farmers are well known. Some political concession should have been made for us," Adhikary told party colleagues.
The UPA government has been trying to pass the twin bills for almost two years. Now, as an adamant Banerjee insists on radical changes, the Congress managers fear it might only see the light of day during the winter session of the Parliament, slated for the end of this year.