Land Valuation Remanded: Supreme Court Revisits Compensation in Land Acquisition Case – State of Madhya Pradesh vs. Radheshyam (24 November 2022)

Introduction

Date of the Judgment: 24 November 2022
Citation: (2022) INSC 1024
Judges: S. Abdul Nazeer, J. and Krishna Murari, J.
When the government acquires land for public use, how should the compensation be calculated? The Supreme Court of India recently addressed this question in a case concerning land acquired for the rehabilitation of displaced persons. The court examined whether the High Court correctly determined the market value of the land and the deductions made for development charges. The bench comprised of Justice S. Abdul Nazeer and Justice Krishna Murari, who authored the judgment.

Case Background

The case involves land acquired by the State of Madhya Pradesh in Village Sala, District Dhar, for the rehabilitation of persons displaced by the Sardar Sarovar Dam project. The initial notification for acquisition was issued on February 27, 2004, under Section 4(1) of the Land Acquisition Act, 1894. The Land Acquisition Officer (LAO) awarded compensation on December 23, 2004, at Rs. 47,165 per hectare for irrigated land and Rs. 29,621 per hectare for unirrigated land. Dissatisfied with the compensation, the landowners sought a reference under Section 18 of the Land Acquisition Act, 1894, for enhanced compensation. The Reference Court enhanced the compensation, determining the market value at Rs. 36,62,400 per hectare for irrigated land and Rs. 24,41,600 per hectare for unirrigated land, with a 48% deduction for development charges. Both the State and the landowners appealed to the High Court. The High Court reduced the deduction to 35% and corrected the market value based on a review application. The State then appealed to the Supreme Court.

Timeline:

Arguments

Arguments on behalf of the Appellant (State of Madhya Pradesh):

• The Reference Court incorrectly relied on small land portions to determine the market value of large land areas.
• The High Court erred in reducing development charge deductions from 48% to 35%.
• The exemplar sale deeds (Ex P2 to P4) used to determine market value were of small plots and not representative of the large acquired land.
• The High Court’s order resulted in an exorbitant increase in compensation, exceeding the current market rate.
• No evidence was presented by the landowners regarding the availability of facilities like electricity, water, and roads on the land.
• The cost of small acquired plots cannot be the basis for fixing the price of large area plots.
• Reliance was placed on Kasturi & Ors. Vs. State of Haryana [(2003) 1 SCC 354] to argue that claimants must show evidence of development for their land to be considered developed.
• Reliance was placed on U.P. Awas Evam Vikas Parishad Vs. Jainul Islam and Anr. [(1998) 2 SCC 467], to argue that proper deductions should have been done, which can be 1/3rd of cost of sale of small plot.
• Reliance was placed on Trishala Jain & Anr. Vs. State of Uttarakhand & Anr. [(2011) 6 SCC 47], to argue that deduction is to be applied on account of carrying out development activities like providing roads or civic amenities.

Arguments on behalf of the Respondents (Landowners):

• The matter was already decided by the Supreme Court in Upendra Singh Vs. State of M.P. & Anr., where a similar order of the High Court was upheld.
• The High Court correctly determined the value of the land based on exemplars and established a 35% total deduction (20% for land utilization and 15% for development).
• The High Court rightly rejected the Reference Court’s method of deducting 65% initially and then 48% from the remaining value.
• The State government has implemented the order in Upendra Singh’s case, implying acceptance of the High Court’s decision.

Submissions of Parties

Issues Framed by the Supreme Court

The Supreme Court framed the following issues for consideration:

1. Determination of market value of land acquired.
2. Deduction to be made towards utilization of land and development charges.

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authorities:

Cases:

• Special Land Acquisition Officer, Bangalore Vs. T. Adinarayan Setty [1959 Supp.(1) SCR 404], Supreme Court of India – Discussed methods of valuation for land acquisition.
• Viluben Jhalejar Contractor (Dead) by LRs. Vs. State of Gujarat [(2005) 4 SCC 789], Supreme Court of India – Laid down principles for determining market value of acquired land.
• Kasturi & Ors. Vs. State of Haryana [(2003) 1 SCC 354], Supreme Court of India – Discussed the need for evidence of development for claiming land is developed.
• U.P. Awas Evam Vikas Parishad Vs. Jainul Islam and Anr. [(1998) 2 SCC 467], Supreme Court of India – Discussed deductions to be made when using small plot sales to value large plots.
• Trishala Jain & Anr. Vs. State of Uttarakhand & Anr. [(2011) 6 SCC 47], Supreme Court of India – Discussed deductions for development activities.
• Bhagwanthulla Samanna & Ors. Vs. Special Tehsildar and Land Acquisition Officer [(1991) 4 SCC 506], Supreme Court of India – Discussed factors for deductions based on land development.
• Lal Chand Vs. Union of India & Anr. [(2009) 15 SCC 769], Supreme Court of India – Discussed the range of deductions for development.
• Charan Dass (Dead) by LRs. Vs. H.P. Housing & Urban Development Authority & Ors. [(2010) 13 SCC 398], Supreme Court of India – Discussed when deductions for development are warranted.
• Noida Vs. Surendra Singh [2015 SCC OnLine ALL 5945], Allahabad High Court – Discussed that deductions are not mandatory in every case.

Legal Provisions:

• Section 4(1) of the Land Acquisition Act, 1894 – Notification for land acquisition.
• Section 6 of the Land Acquisition Act, 1894 – Declaration of land acquisition.
• Section 18 of the Land Acquisition Act, 1894 – Reference to court for enhanced compensation.

Authorities Considered by the Court

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

✓ The Supreme Court relied on Special Land Acquisition Officer, Bangalore Vs. T. Adinarayan Setty [1959 Supp.(1) SCR 404]* for the methods of valuation in land acquisition, emphasizing the need to consider comparable land sales.
✓ The Court used Viluben Jhalejar Contractor (Dead) by LRs. Vs. State of Gujarat [(2005) 4 SCC 789]* to establish the principles for determining the market value of acquired land, highlighting the importance of considering both positive and negative factors.
✓ The Court referred to Kasturi & Ors. Vs. State of Haryana [(2003) 1 SCC 354]* to underscore that claimants must provide evidence to prove their land is developed.
✓ The Court cited U.P. Awas Evam Vikas Parishad Vs. Jainul Islam and Anr. [(1998) 2 SCC 467]* to emphasize that proper deductions should be made when using small plot sales to value large plots.
✓ The Court used Trishala Jain & Anr. Vs. State of Uttarakhand & Anr. [(2011) 6 SCC 47]* to support the application of deductions for development activities.
✓ The Court relied on Bhagwanthulla Samanna & Ors. Vs. Special Tehsildar and Land Acquisition Officer [(1991) 4 SCC 506]* to discuss the factors for deductions based on land development, noting that deductions are not always justified.
✓ The Court cited Lal Chand Vs. Union of India & Anr. [(2009) 15 SCC 769]* to establish that the deduction towards development can range from 20% to 75%.
✓ The Court used Charan Dass (Dead) by LRs. Vs. H.P. Housing & Urban Development Authority & Ors. [(2010) 13 SCC 398]* to illustrate when deductions for development are warranted.
✓ The Court cited Noida Vs. Surendra Singh [2015 SCC OnLine ALL 5945]* to support that deductions are not mandatory in every case.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the need for a fair and accurate valuation of the acquired land, based on established legal principles. The Court was concerned that the High Court had not properly considered the specific characteristics of the land in question, and had instead relied on a previous case without sufficient justification. The Court emphasized the importance of analyzing evidence and material on record, and not merely applying a blanket formula. The factors that weighed in the mind of the Court were:

• The High Court’s failure to analyze the evidence on record.
• The incorrect application of the market value determined in the Upendra Singh case.
• The need for a proper determination of deductions for development charges based on specific facts.
• The importance of considering the nature and location of the land.
• The need for a fair and just compensation for the landowners.

Ranking of Sentiment Analysis of Reasons Given by the Supreme Court:

Fact:Law Ratio

Logical Reasoning

Key Takeaways

• The market value of acquired land must be determined based on specific characteristics and evidence, not by applying a blanket formula from other cases.
• Deductions for development charges should be based on the evidence presented and the specific nature of the land, not a fixed percentage.
• High Courts must analyze all relevant evidence and material on record when determining compensation in land acquisition cases.
• The Supreme Court emphasized the importance of a fair and just compensation for landowners.

Directions

The Supreme Court set aside the High Court’s judgment dated 20.06.2016 and remitted the matter back to the High Court for fresh consideration. The High Court was directed to determine the compensation appropriately, in accordance with the law and settled principles, taking into account all relevant evidence and material available on record for both irrigated and unirrigated land. The High Court was also directed to re-determine the deduction to be made towards development charges afresh, considering all relevant evidence, facts, and materials on record. The order dated 08.09.2017, passed by the High Court for correction of an alleged accidental slip, was also set aside.

Development of Law

The ratio decidendi of this case is that the market value of land acquired must be determined based on specific characteristics and evidence, not by applying a blanket formula from other cases. The Supreme Court clarified that deductions for development charges should be based on the evidence presented and the specific nature of the land, and not a fixed percentage. This ruling reinforces the principles of fair compensation in land acquisition, emphasizing the need for a case-specific analysis. This judgment does not change the previous position of law but reinforces the existing principles and provides clarity on their application.

Conclusion

The Supreme Court’s decision in State of Madhya Pradesh vs. Radheshyam underscores the importance of a thorough, evidence-based approach to determining compensation in land acquisition cases. By remanding the case to the High Court, the Supreme Court has emphasized that market value and development deductions must be determined based on the specific facts and circumstances of each case. This judgment serves as a reminder that a fair and just compensation for landowners is paramount and that courts must not rely on blanket formulas or previous cases without proper analysis.