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Synopsis

The Supreme Court recently observed that when calculating compensation for acquired land, the court must evaluate the 'market value' based on the 'date of publication of the notification.' This assessment should factor in standing crops and trees, the severance of parts of the land, any damage to movable or immovable property or earnings, and the need for relocation of residence or business.

A bench comprising Justices Surya Kant and K.V. Viswanathan highlighted that, generally, the most effective approach is the comparable sales method, which relies on genuine sale examples of similar land to determine the market value of the land in question.

However, to ensure that the valuation is just and proper, the top court pointed out that it has explained that such sale exemplars must satisfy certain criteria, including that: (a) the sale must be a genuine transaction; (b) the sale deed must have been executed around the time of the Section 4 notification; (c) the land must be situated near the acquired land; (d) the nature of the land covered in the sale instance must be similar to the acquired land; and (e) the size of the plot covered by the sale instance should be comparable to the land acquired.

The bench also said that apart from satisfying these factors, it is also imperative that the sale exemplars reflect the price of the land on the ‘date of publication of the notification under Section 4’ of the Land Acquisition Act.

On account of this express condition, there are numerous instances where this court has laid down that the sale exemplars executed after the Section 4 notification should not ordinarily be relied upon. This is grounded in the reasoning that once the acquisition process begins, it can impact the valuation of the land, rendering subsequent sale exemplars to be potentially inaccurate reflections of the true valuation of the acquired land, the bench said.

The court was dealing with a batch of appeals filed by Horrmal (deceased) through legal representatives and others against the Punjab and Haryana High Court's judgment of 2022, which dismissed their appeals against the further engagement of compensation for their acquired lands.

The High Court had set aside the awards passed by the Reference Court and restored the compensation granted by the Land Acquisition Collector.

The acquisition process for land measuring approximately 302.75 acres was initiated in 2012 for the development and utilisation of land for public purposes, specifically for carving out residential and utility areas in Mewat District under the Haryana Urban Development Authority Act, 1977. 

Examining the matter, the bench said there is no bar in law against considering sale exemplars of smaller plots, provided they are subjected to adequate developmental charges. The rationale behind applying such cuts lies in the fact that smaller plots often command higher prices due to their developed nature, whereas a larger tract of land which is acquired for development may require significant allocation for creating roads, parks, essential services, etc.

Having established the sale exemplar being relied upon and consequentially the base price to be Rs 1,81,33,867 per acre, the bench emphasised there is no hard and fast rule on the amount of deduction to be applied towards development charges. Instead, such deductions may, for the purpose of making a small area of land comparable to larger tracts, range from a minimum of 20% to a maximum of 75%, the court said.

"What is also of utmost importance is that the value of the land is corroborated by surrounding circumstances, which point towards its potentiality," it said.

Adopting a balanced approach in adjudicating this particular issue, the court said it cannot justify applying deduction at either extreme end of the spectrum. 

"A prudent course of action might be to steer a middle path, aiming for a range approximately between 46% to 50%," it said.

In its analysis, the court, thus, found that he compensation awarded by the Reference Court, at the rate of Rs 92,62,500 per acre, was neither excessive nor beyond the fair and just value of the acquired land.

"However, considering the totality of the circumstances and recognising that the subject land has not been acquired for profiteering or commercial purposes, but primarily for the development of a residential area, we find it appropriate to rely on the valuation reflected in the best exemplar, Ex. P/5 (Rs 1.81 Cr per acre), as a fair and reasonable basis for compensation," the bench said.

The bench held that the High Court erred in reducing the valuation of the land and affirming the figures granted by the Land Acquisition Collector. 

The evaluation conducted by the Reference Court was nearly accurate and aligned with the evidence of the sale deeds and potentiality, despite the fact that the sale exemplar, relied upon by it, may not have been ideal, given the circumstances and its commercial nature, it pointed out.

The top court, therefore, allowed the appeals, set aside the High Court's judgment and restored the compensation granted by the Reference Court.

The compensation amount, if already not paid, wholly or partly, as per the award of the Reference Court, shall be paid to the appellants and other land-owners along with all the statutory benefits including interest, within eight weeks, the bench ordered.

Case Title: Horrmal (Deceased) through his LRs and Others Vs State of Haryana and Others