Date of the Judgment: 19 April 2022
Citation: [Not Available in the provided text]
Judges: M.R. Shah, J. and B.V. Nagarathna, J.
When land is acquired for industrial development, how should the compensation be calculated? The Supreme Court of India recently addressed this question in a series of appeals concerning land acquired for the Maharashtra Industrial Development Corporation (MIDC). The court considered the market value of the land, its potential for non-agricultural use, and the need for a fair increase over time. The bench, composed of Justices M.R. Shah and B.V. Nagarathna, delivered a judgment that partly allowed the appeals, enhancing the compensation for the original landowners.
Case Background
The State Government initiated land acquisition proceedings for the Maharashtra Industrial Development Corporation (MIDC) to expand its industrial estate in Bhoyar village, Yavatmal district. A notification was issued on 09 March 1995, under Section 32(2) of the Maharashtra Industrial Development Act, 1961, for acquiring various land parcels in the village. The Special Land Acquisition Officer determined the initial compensation, which the original landowners contested, leading to references to the Reference Court. The Reference Court enhanced the compensation, prompting both the landowners and MIDC to appeal to the High Court. The High Court partly allowed the appeals by MIDC, reducing the compensation awarded by the Reference Court. Aggrieved by this, the original landowners appealed to the Supreme Court.
Timeline:
| Date | Event |
|---|---|
| 30 November 1994 | Notification under Section 1(3) r/w 31 of the Maharashtra Industrial Development Act, 1961. |
| 09 March 1995 | Notification under Section 32(2) of the Maharashtra Industrial Development Act, 1961, initiating land acquisition proceedings. |
| 27 November 1997 | Land Acquisition Officer declared the award for Civil Appeal No. 2732/2022, determining compensation at Rs.50,000/- per Hectare for cultivable land and Rs.1,500/- per Hectare for uncultivable land. |
| 18 September 1992 | Sale deed (Ex. 41) for land in Survey No. 20/2, Bhoyar village, used as a key reference for valuation. |
Course of Proceedings
The original claimants, dissatisfied with the compensation awarded by the Land Acquisition Officer, sought references under Section 34 of the Maharashtra Industrial Development Act, 1961, read with Section 18 of the Land Acquisition Act, 1894. The Reference Court enhanced the compensation. Both the original claimants and the acquiring body, MIDC, appealed the Reference Court’s decision to the High Court. The High Court partly allowed the appeals by the acquiring body, reducing the compensation. This led to the original claimants filing the current appeals before the Supreme Court.
Legal Framework
The land acquisition was initiated under the Maharashtra Industrial Development Act, 1961. Specifically, Section 32(2) of the Act was used to issue the notification for acquiring the lands. The compensation was determined by the Special Land Acquisition Officer. Dissatisfied landowners sought recourse under Section 34 of the Maharashtra Industrial Development Act, 1961, read with Section 18 of the Land Acquisition Act, 1894, which allows for references to the Reference Court for enhanced compensation.
The relevant sections of the Maharashtra Industrial Development Act, 1961, include:
- Section 32(2): This section empowers the State Government to issue notifications for land acquisition for the purposes of the Maharashtra Industrial Development Corporation.
- Section 34: This section provides the mechanism for landowners to seek a reference to the court for enhanced compensation if they are not satisfied with the initial award.
Arguments
Arguments by the Original Claimants:
The original claimants argued that:
- ✓ The acquisition was for a commercial purpose, i.e., extension of an industrial area, which should be a key factor in determining compensation.
- ✓ The High Court erred in relying solely on the sale deed at Ex. 41, which was for agricultural land and did not reflect the commercial value of the acquired land.
- ✓ Sale deeds often undervalue the actual sale consideration to save on stamp duty and registration charges.
- ✓ The land had non-agricultural potential due to its proximity to the MIDC area and its location near the district place of Yavatmal.
- ✓ The landowners should be uniformly compensated at the same rate, as the contiguous land of three villages was acquired for a common purpose.
- ✓ The High Court failed to consider the non-agricultural potential and commercial value of the acquired land.
- ✓ The land owners of village Lohara were awarded higher compensation and the claimants should also be awarded the same compensation.
Arguments by the MIDC and the State:
The MIDC and the State contended that:
- ✓ The High Court had given cogent reasons for reducing the compensation awarded by the Reference Court.
- ✓ The High Court rightly relied on the sale deed at Ex. 41, which was for a land in the same village, and provided a reasonable increase to determine the fair market value.
- ✓ The acquired lands were agricultural, and development charges should be deducted for industrial use.
- ✓ The future use of the acquired land should not be a factor in determining compensation.
- ✓ The High Court had followed the principle that a cumulative increase of 10 to 15% per year in the market value of the land may be accepted.
- ✓ The sale price of the acquired land is the best evidence for determining its fair market value.
The MIDC and the State relied on the following cases:
- ✓ Dollar Co. v. Collector of Madras, (1975) 2 SCC 730: On the principle that the sale price of the acquired land is the best evidence for determining its fair market value.
- ✓ Shakuntalabai v. State of Maharashtra, (1996) 2 SCC 152: On the principle that the sale price of the acquired land is the best evidence for determining its fair market value.
- ✓ T.S. Ramachandra Shetty v. Chairman, Karnataka Housing Board, (2009) 14 SCC 334: On the principle that the sale price of the acquired land is the best evidence for determining its fair market value.
- ✓ Tarlochan Singh v. State of Punjab, (1995) 2 SCC 424: On the principle that all lands in the same village may not possess the same quality and command a common market price.
- ✓ Hookiyar Singh v. Special Land Acquisition Officer, (1996) 3 SCC 766: On the principle that the purpose of acquisition/future use of acquired land cannot be considered for determination of compensation.
- ✓ Subh Ram v. State of Haryana, (2010) 1 SCC 444: On the principle that the purpose of acquisition/future use of acquired land cannot be considered for determination of compensation.
- ✓ Kanwar Singh v. Union of India, (1998) 8 SCC 136: On the principle that the land in adjacent village or even the same village may not possess the same quality and therefore cannot command common market price.
- ✓ General Manager, ONGC Ltd. v. Rameshbhai Jivanbhai Patel, (2008) 14 SCC 745: On the cumulative increase which would vary from 10 to 15% per year in the market value of the land.
- ✓ Pehlad Ram v. Haryana Urban Development Authority, (2014) 14 SCC 778: On the cumulative increase which would vary from 10 to 15% per year in the market value of the land.
- ✓ Manoj Kumar v. State of Haryana, (2018) 13 SCC 96: On the cumulative increase which would vary from 10 to 15% per year in the market value of the land.
The innovativeness of the arguments by the original claimants lies in their emphasis on the commercial purpose of the acquisition and the non-agricultural potential of the land, arguing that these factors should significantly increase the compensation. They also highlighted the undervaluation of sale deeds and the need for uniform compensation across contiguous lands acquired for the same purpose.
| Main Submission | Sub-Submissions by Claimants | Sub-Submissions by MIDC |
|---|---|---|
| Valuation of Land |
|
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| Purpose of Acquisition |
|
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| Uniform Compensation |
|
|
Issues Framed by the Supreme Court
The Supreme Court addressed the following issues:
- Whether the High Court was justified in relying solely on the sale deed at Ex. 41 for determining the market value of the acquired land?
- Whether the High Court was correct in applying a 10% cumulative increase to the market value of the land?
- Whether the future use of the acquired land for industrial purposes should be a factor in determining compensation?
- Whether different rates of compensation could be awarded for different lands in the same village?
Treatment of the Issue by the Court
| Issue | Court’s Decision |
|---|---|
| Reliance on Ex. 41 | The court found that the High Court was justified in relying on the sale deed at Ex. 41 as it pertained to the same village, but the cumulative increase should have been 12% instead of 10%. |
| Cumulative Increase | The court held that a 12% cumulative increase was more appropriate based on the facts and circumstances of the case. |
| Future Use of Land | The court reiterated that the future use of the land is not the main criteria for determining compensation, as the landowner is compensated for what they lost, not for the purpose of acquisition. |
| Different Compensation Rates | The court acknowledged that different lands in the same village can have different market values based on their location and potential, thereby justifying different compensation rates. |
Authorities
The Supreme Court considered the following authorities:
| Authority | Legal Point | How the Court Considered |
|---|---|---|
| Dollar Co. v. Collector of Madras, (1975) 2 SCC 730 [Supreme Court of India] | Sale price of acquired land as best evidence | Cited as a principle that the sale price of the acquired land is the best evidence for determining its fair market value. |
| Shakuntalabai v. State of Maharashtra, (1996) 2 SCC 152 [Supreme Court of India] | Sale price of acquired land as best evidence | Cited as a principle that the sale price of the acquired land is the best evidence for determining its fair market value. |
| T.S. Ramachandra Shetty v. Chairman, Karnataka Housing Board, (2009) 14 SCC 334 [Supreme Court of India] | Sale price of acquired land as best evidence | Cited as a principle that the sale price of the acquired land is the best evidence for determining its fair market value. |
| Tarlochan Singh v. State of Punjab, (1995) 2 SCC 424 [Supreme Court of India] | Different market value for different lands | Cited to support the view that lands in the same village may not possess the same quality and command a common market price. |
| Hookiyar Singh v. Special Land Acquisition Officer, (1996) 3 SCC 766 [Supreme Court of India] | Future use of land not a relevant consideration | Cited to support the principle that future use of acquired land is not a relevant consideration for determining compensation. |
| Subh Ram v. State of Haryana, (2010) 1 SCC 444 [Supreme Court of India] | Purpose of acquisition not a factor to increase market value | Cited to support the principle that the purpose of acquisition cannot be a factor to increase the market value of the acquired land. |
| Kanwar Singh v. Union of India, (1998) 8 SCC 136 [Supreme Court of India] | Difference in potentiality of lands in different villages | Cited to support the view that lands in adjacent villages may not possess the same quality and cannot command a common market price. |
| General Manager, ONGC Ltd. v. Rameshbhai Jivanbhai Patel, (2008) 14 SCC 745 [Supreme Court of India] | Cumulative increase in market value | Cited to support the principle that the cumulative increase in the market value of the land would vary from 10 to 15% per year. |
| Pehlad Ram v. Haryana Urban Development Authority, (2014) 14 SCC 778 [Supreme Court of India] | Cumulative increase in market value | Cited to support the principle that the cumulative increase in the market value of the land would vary from 10 to 15% per year. |
| Manoj Kumar v. State of Haryana, (2018) 13 SCC 96 [Supreme Court of India] | Cumulative increase in market value | Cited to support the principle that the cumulative increase in the market value of the land would vary from 10 to 15% per year. |
The court also considered the following legal provisions:
- ✓ Section 32(2) of the Maharashtra Industrial Development Act, 1961: This provision empowers the State Government to issue notifications for land acquisition for the purposes of the Maharashtra Industrial Development Corporation.
- ✓ Section 34 of the Maharashtra Industrial Development Act, 1961: This provision provides the mechanism for landowners to seek a reference to the court for enhanced compensation if they are not satisfied with the initial award.
- ✓ Section 18 of the Land Acquisition Act, 1894: This provision provides the mechanism for landowners to seek a reference to the court for enhanced compensation if they are not satisfied with the initial award.
Judgment
| Submission by Parties | How it was treated by the Court |
|---|---|
| Claimants’ argument that the acquisition was for commercial purpose and should be a key factor in determining compensation. | The Court acknowledged that the land was acquired for industrial use but held that the future use of the land cannot be the main criteria to determine compensation. |
| Claimants’ argument that the High Court erred in relying solely on sale deed at Ex. 41. | The Court held that the High Court was justified in relying on Ex. 41 but modified the cumulative increase from 10% to 12%. |
| Claimants’ argument that landowners should be uniformly compensated. | The Court held that different lands can have different market values based on location, justifying different compensation rates. |
| MIDC’s argument that the High Court had given cogent reasons for reducing the compensation. | The Court agreed that the High Court had given cogent reasons, but modified the compensation by increasing the cumulative increase from 10% to 12% and the non-agricultural potentiality by 50%. |
| MIDC’s argument that the future use of the land should not be a factor in determining compensation. | The Court upheld this argument, stating that the landowner is compensated for what they lost, not for the purpose of acquisition. |
The following authorities were viewed by the Court as follows:
- ✓ Dollar Co. v. Collector of Madras, (1975) 2 SCC 730: The Court followed the principle that the sale price of the acquired land is the best evidence for determining its fair market value.
- ✓ Shakuntalabai v. State of Maharashtra, (1996) 2 SCC 152: The Court followed the principle that the sale price of the acquired land is the best evidence for determining its fair market value.
- ✓ T.S. Ramachandra Shetty v. Chairman, Karnataka Housing Board, (2009) 14 SCC 334: The Court followed the principle that the sale price of the acquired land is the best evidence for determining its fair market value.
- ✓ Tarlochan Singh v. State of Punjab, (1995) 2 SCC 424: The Court followed the principle that all lands in the same village may not possess the same quality and command a common market price.
- ✓ Hookiyar Singh v. Special Land Acquisition Officer, (1996) 3 SCC 766: The Court followed the principle that the future use of the land is not a relevant consideration for determining compensation.
- ✓ Subh Ram v. State of Haryana, (2010) 1 SCC 444: The Court followed the principle that the purpose of acquisition cannot be a factor to increase the market value of the acquired land.
- ✓ Kanwar Singh v. Union of India, (1998) 8 SCC 136: The Court followed the principle that the land in adjacent village or even the same village may not possess the same quality and therefore cannot command common market price.
- ✓ General Manager, ONGC Ltd. v. Rameshbhai Jivanbhai Patel, (2008) 14 SCC 745: The Court followed the principle that the cumulative increase in the market value of the land would vary from 10 to 15% per year.
- ✓ Pehlad Ram v. Haryana Urban Development Authority, (2014) 14 SCC 778: The Court followed the principle that the cumulative increase in the market value of the land would vary from 10 to 15% per year.
- ✓ Manoj Kumar v. State of Haryana, (2018) 13 SCC 96: The Court followed the principle that the cumulative increase in the market value of the land would vary from 10 to 15% per year.
The Supreme Court partly allowed the appeals, modifying the compensation awarded by the High Court. The Court held that a 12% cumulative increase should have been applied instead of 10%. The Court also added 50% towards the non-agricultural potentiality of the land. The final compensation was determined as follows:
- ✓ Where the High Court had awarded Rs. 2,00,000/- per hectare, the Supreme Court enhanced it to Rs. 2,25,000/- per hectare.
- ✓ Where the High Court had awarded Rs. 1,80,000/- per hectare, the Supreme Court enhanced it to Rs. 2,00,000/- per hectare.
- ✓ Where the High Court had awarded Rs. 1,50,000/- per hectare, the Supreme Court enhanced it to Rs. 1,75,000/- per hectare.
The court observed, “Looking to the fact that the sale deed produced at Ex. 41 with respect to the land bearing Survey No. 20/2 was with respect to the very village Bhoyar which was the only sale exemplar of the same village and other sale exemplars/sale deeds were with respect to another village Lohara and also with respect to small pieces of land, we are of the considered view that the High Court has rightly relied upon and considered the sale exemplar at Ex. 41 while determining the compensation in the present cases with respect to the lands of very village Bhoyar.”
The court further noted, “However, at the same time, bearing in mind the decision of this Court in the case of Pehlad Ram (supra), by which this Court has observed and held that a cumulative increase of 10 to 15% per year in the market value of the land may be accepted, in the facts and circumstances of the case, we are of the opinion that instead of 10% cumulative increase as adopted by the High Court, if 12% cumulative increase would have been adopted, it would have been just and proper and in the fitness of things.”
The court also clarified, “Even otherwise, the future use of the acquired land cannot be the main criteria to determine the compensation for the lands acquired.”
What weighed in the mind of the Court?
The Supreme Court’s decision was primarily influenced by the need to balance the interests of the landowners with the principles of fair compensation. The Court emphasized the importance of relying on the best available evidence, which in this case was the sale deed at Ex. 41 from the same village. However, the Court also recognized the need to account for the time gap between the sale deed and the acquisition, and the non-agricultural potential of the land. The Court’s reasoning reflects a careful consideration of both factual and legal aspects, aiming to provide a just outcome for all parties involved.
| Reason | Sentiment | Percentage |
|---|---|---|
| Reliance on sale deed at Ex. 41 | Neutral | 30% |
| Need for a 12% cumulative increase | Positive | 30% |
| Non-agricultural potential of the land | Positive | 20% |
| Future use of the land is not the main criteria | Neutral | 20% |
| Category | Percentage |
|---|---|
| Fact | 40% |
| Law | 60% |
Key Takeaways
The key takeaways from this judgment are:
- ✓ When determining compensation for land acquisition, courts should primarily rely on the best available evidence, such as sale deeds of comparable land in the same village.
- ✓ A cumulative increase of 10-15% per year in the market value of land may be considered, with the specific percentage depending on the facts and circumstances of the case.
- ✓ The future use of the acquired land should not be the main factor in determining compensation, as the landowner is compensated for what they lost, not for the purpose of acquisition.
- ✓ Different lands in the same village can have different market values based on their location and potential, justifying different compensation rates.
- ✓ Courts should consider non-agricultural potential of the land while determining the compensation.
Directions
The Supreme Court directed that the claimants in Civil Appeal Nos. 2746-2747/2022 and Civil Appeal No. 2745/2022 would not be entitled to interest on the enhanced amount of compensation for the delayed period in preferring the appeals.
Development of Law
The ratio decidendi of this case is that while determining compensation for land acquisition, the best available evidence, such as sale deeds of comparable land in the same village, should be primarily relied upon. A cumulative increase of 12% per year is appropriate and 50% increase for non-agricultural potentiality should be given. The future use of the land is not a primary factor, and different lands can have different values. This judgment clarifies the application of these principles in the context of industrial development projects and provides a balanced approach to fair compensation.
Conclusion
The Supreme Court’s judgment in this case provides clarity on the principles to be applied when determining compensation for land acquired for industrial development. The Court emphasized the importance of relying on the best available evidence, applying a reasonable cumulative increase, and considering the non-agricultural potential of the land. The decision ensures a fair balance between the interests of the landowners and the needs of industrial development.