Supreme Court Reduces Compensation for Land Acquisition in Haryana: HSIIDC vs. Satpal (2023)

Date of the Judgment: 09 February 2023
Citation: [Not Available in Source]
Judges: M.R. Shah, J. and Hima Kohli, J.

How should courts determine fair compensation for land acquired for public purposes? The Supreme Court of India recently addressed this crucial question in a case involving the Haryana State Industrial and Infrastructure Development Corporation (HSIIDC). The court examined the method used by the High Court of Punjab and Haryana to calculate compensation for land acquired for industrial development, ultimately reducing the amount awarded. This case highlights the importance of adhering to established legal principles and considering relevant factors when determining fair market value in land acquisition cases.

Case Background

The case involves land acquired in the Sonipat district of Haryana for the Kundli-Manesar-Palwal (KMP) Expressway and the expansion of industrial sector 39. The Haryana State Industrial and Infrastructure Development Corporation (HSIIDC) acquired land through two notifications: one on 30 June 2005, and another on 5 March 2007. These acquisitions affected villages Badh Malik, Pritampura, and Rasoi.

Initially, the Land Acquisition Officer awarded ₹16,00,000 per acre. The Reference Court enhanced this to ₹19,00,000 per acre for Badh Malik and Rasoi (for the 2005 acquisition), but did not enhance compensation for Pritampura. For the 2007 acquisition, the Reference Court enhanced compensation only for Rasoi, to ₹23,00,000 per acre.

In the first round of appeals, the High Court significantly increased compensation, introducing a “belting system” that awarded higher compensation for land closer to the road. However, the Supreme Court set aside this approach and remanded the case, emphasizing that the land value should be based on the value prevalent before 13 August 2004. On remand, the High Court awarded ₹29,54,000 per acre for the 2005 acquisition and ₹45,00,000 per acre for the 2007 acquisition. HSIIDC appealed this decision to the Supreme Court.

Timeline

Course of Proceedings

The matter reached the High Court of Punjab & Haryana in the form of first appeals against the Reference Court’s decisions. Initially, the High Court enhanced the compensation significantly, introducing a “belting system”. However, the Supreme Court in Civil Appeal No. 12847/2017 and Civil Appeal No. 20050/2017, set aside the High Court’s orders and remanded the matter for fresh consideration. The Supreme Court specifically disapproved of the “belting system” and directed the High Court to consider the land value prevalent before 13 August 2004. On remand, the High Court again enhanced the compensation, leading to the current appeals before the Supreme Court by HSIIDC. It is important to note that the landowners’ appeals against the High Court’s judgment were dismissed by the Supreme Court earlier, making HSIIDC the sole appellant in the current proceedings.

Legal Framework

The case is governed by the Land Acquisition Act, 1894. The core legal issue revolves around determining the fair market value of the acquired land. Section 25 of the Land Acquisition Act, 1894, is relevant here, as it deals with the determination of the amount of compensation. The Act mandates that compensation should reflect the market value of the land at the time of acquisition. The Supreme Court has emphasized that this determination should be based on factors such as comparable sales and the potential of the land.

Arguments

Arguments by HSIIDC (Appellants):

• The High Court erred in enhancing compensation to ₹29,54,000 per acre for the 2005 acquisition.
• The High Court wrongly relied on builder’s sale deeds (Exhibits P43 & P44) and ignored sale deeds produced by the State.
• The acquired lands were agricultural, and thus, builder’s sale deeds were not appropriate comparables.
• The High Court failed to consider that land acquisition in the area had commenced from 13 August 2004, and the market price as of that date should have been the basis for valuation.
• Even if the High Court was correct in using Exhibits P43 & P44, a 50% cut should have resulted in a compensation of ₹24,43,693 per acre, not ₹29,54,000.
• For the 2007 acquisition, the High Court erred in awarding ₹45,00,000 per acre.
• Considering the time gap of approximately one year and nine months between the two notifications, and granting a cumulative increase of 8 to 12 percent, the compensation of ₹45,00,000 per acre was excessive.
• The High Court had earlier awarded ₹21,00,000 per acre for the land acquired on 13 August 2004 and considering the time gap, the amount awarded by the High Court at Rs. 45,00,000/- per acre is unsustainable.

Arguments by Landowners (Respondents):

• The High Court did not consider all relevant sale deeds, and if it had, the compensation would have been higher.
• The landowners are entitled to just compensation based on the fair market value, as this is a case of compulsory acquisition.
• The market value of the land in October 2005 and 2006 was much higher, as evidenced by sale deeds Ex. P4, P3, P6, P7 & P5 of village Badh Malik and Badh Khalsa.

Submissions of Parties

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame issues in a separate section. However, the key issues that the court addressed were:

1. Whether the High Court was justified in enhancing the compensation to ₹29,54,000 per acre for the land acquired vide notification dated 30.06.2005.
2. Whether the High Court was justified in enhancing the compensation to ₹45,00,000 per acre for the land acquired vide notification dated 05.03.2007.
3. What is the fair market value of the acquired lands, considering the relevant factors and legal principles?

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues

Authorities

The Supreme Court considered the following authorities:

Judgment

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

How each authority was viewed by the Court?

• General Manager, Oil and Natural Gas Corporation Limited v. Rameshbhai Jivanbhai Patel and Another, (2008) 14 SCC 745* and Mehrawal Khewaji Trust (Registered), Faridkot and others v. State of Punjab and others, (2012) 5 SCC 432*: These cases were cited by the landowners in support of their claim for just compensation. The Court acknowledged the principle of just compensation but did not find the High Court’s valuation to be correct.
• Section 25 of the Land Acquisition Act, 1894: The Court recognized this as the relevant provision for determining compensation, emphasizing that the compensation should reflect the market value of the land at the time of acquisition.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the need to ensure a fair and accurate assessment of compensation based on established legal principles and factual evidence. The Court emphasized the following points:

• Relevance of the date 13.08.2004: The court reiterated its earlier direction that the market value of the land should be assessed based on the value prevalent before 13.08.2004, as this was the date when acquisition for the KMP project began.
• Appropriate use of sale deeds: The court found that the High Court erred in relying on builder’s sale deeds (Ex. P43 & P44) for the 2005 acquisition and also in using sale deed Ex. P4 dated 2.11.2006 for the 2007 acquisition.
• Application of cut-off: The court held that the High Court misapplied the 50% cut-off while determining the compensation for the 2005 acquisition.
• Cumulative increase: The court determined that a cumulative increase of 8 to 12 percent on the compensation awarded for the 2005 acquisition was appropriate for the 2007 acquisition, considering the time gap between the two notifications.

Fact:Law

Logical Reasoning:

The Supreme Court found that the High Court had not correctly applied the principles of valuation and had relied on inappropriate sale deeds. The court emphasized that the compensation should be based on the market value of the land as of 13.08.2004 and that subsequent sales could not be the basis for determining compensation. The Court held that the High Court had made a serious error in assessing and determining the compensation @ Rs. 29,54,000/- per acre for the land acquired vide notification dated 30.06.2005. The court also held that the High Court erred in using sale deed Ex. P4 dated 2.11.2006, for the 2007 acquisition, and that a cumulative increase of 8 to 12 percent on the compensation awarded for the 2005 acquisition was more appropriate.

The Court’s decision was unanimous, with both judges agreeing on the final outcome. There were no dissenting opinions.

The Supreme Court modified the High Court’s judgment, reducing the compensation awarded for both the 2005 and 2007 acquisitions. This decision reinforces the importance of adhering to established legal principles when determining fair compensation in land acquisition cases.

“If we consider the main Ex. P43 & P44, which are the sale deeds dated 15.04.2005 and thereafter applying the cut off of 50%, the market value of the land would come to Rs. 24,43,693/- per acre.”

“Instead, without any adequate reasons, the High Court has assessed and enhanced the amount of compensation @ Rs. 29,54,000/- per acre.”

“On the contrary, giving 8 to 12 percent cumulative increase on the amount of compensation awarded for the land acquired vide notification dated 30.06.2005, would be a safe and guiding factor.”

Key Takeaways

• Importance of Relevant Dates: When determining compensation for land acquisition, the market value of the land should be assessed as of the date of the initial notification or a relevant date prior to it, and not subsequent sales.
• Use of Comparable Sales: Courts should rely on appropriate comparable sales and should not use builder’s sale deeds for agricultural land.
• Application of Cut-offs: Any cut-offs applied in determining compensation must be applied correctly and with adequate reasons.
• Cumulative Increase: A cumulative increase can be applied to the compensation amount to account for the time gap between different notifications.
• Fair Compensation: The principle of fair compensation should be upheld, but it must be based on established legal principles and factual evidence.

Directions

The Supreme Court directed that the landowners/claimants shall be entitled to compensation at ₹24,50,000 per acre for the land acquired vide notification dated 30.06.2005 and at ₹30,73,280 per acre for the land acquired vide notification dated 5.3.2007, along with all other statutory benefits available under the Land Acquisition Act, 1894.

Development of Law

The ratio decidendi of this case is that the determination of fair compensation in land acquisition cases must be based on the market value of the land at the time of acquisition, or a relevant date prior to it, and not subsequent sales. The court emphasized the importance of using appropriate comparable sales, correctly applying cut-offs, and using a cumulative increase to account for time gaps between notifications. This judgment clarifies the method for determining compensation in land acquisition cases, reinforcing the need for a factual and legally sound approach based on the principles of valuation.

Conclusion

The Supreme Court’s decision in HSIIDC vs. Satpal & Others partly allowed the appeals filed by HSIIDC, reducing the compensation awarded by the High Court for land acquired in Haryana. The court emphasized the need to adhere to established legal principles and relevant factors when determining fair market value in land acquisition cases. This judgment provides clarity on how courts should approach valuation in land acquisition cases, ensuring that compensation is fair and based on factual evidence, while also emphasizing the significance of the initial acquisition date and the appropriate use of comparable sales.