Supreme Court Reduces Land Compensation in Maharashtra Land Acquisition Case: Namdeo Shankar Govardhane vs State of Maharashtra (2019) INSC 698 (17 July 2019)

Date of the Judgment: 17 July 2019
Citation: (2019) INSC 698
Judges: Abhay Manohar Sapre, J., Indu Malhotra, J.
Can the price of a small piece of land be the sole determinant for the compensation of a large land acquisition? The Supreme Court of India addressed this question in a case concerning land acquisition for the Mukane Dam in Maharashtra. The Court examined the validity of compensation rates set by the High Court of Judicature at Bombay, which had reduced the compensation awarded by the Civil Court. The judgment was delivered by a two-judge bench comprising Justice Abhay Manohar Sapre and Justice Indu Malhotra, with Justice Sapre authoring the opinion.

Case Background

The case revolves around the acquisition of land in Sanjegaon village, Taluka Igatpuri, District Nasik, Maharashtra, for the construction of the Mukane Dam. The State of Maharashtra initiated the acquisition process by issuing a notification under Section 4 of the Land Acquisition Act, 1894 on March 3, 1994, for acquiring 26,554.39 hectares of land. This was followed by a declaration under Section 6 of the Act on June 17, 1994. The appellants, who were landowners, were among those whose land was acquired.

The Land Acquisition Officer (LAO) initiated proceedings under Section 11 of the Land Acquisition Act, 1894 to determine compensation. On July 14, 1995, the LAO awarded compensation by classifying the land into three categories: Jirayat land, Bagayat land, and Pot Kharab land. The compensation rates were: Jirayat land at Rs. 40,000 to Rs. 1,11,000 per hectare, Bagayat land at 1.5 times the rate of Jirayat land, and Pot Kharab land at Rs. 200 per hectare.

Dissatisfied with the LAO’s award, the landowners sought a reference under Section 18 of the Land Acquisition Act, 1894 to the Civil Court. On March 24, 2006, the Civil Court partly enhanced the compensation rates, setting Jirayat land at Rs. 1,69,231 per hectare, Bagayat land at Rs. 2,11,539 per hectare, and Pot Kharab land at Rs. 84,616 per hectare.

The State of Maharashtra appealed the Civil Court’s decision to the Bombay High Court under Section 54 of the Land Acquisition Act, 1894. The landowners did not file cross-objections, except to contest the land classification. The High Court partly allowed the State’s appeals, reducing the compensation rates. The High Court set the compensation at Rs. 1,26,924 per hectare for Jirayat land, Rs. 1,58,655 per hectare for Bagayat land, and Rs. 1,07,886 per hectare for Pot Kharab land.

Timeline

Course of Proceedings

The Land Acquisition Officer (LAO) initially determined compensation for the acquired lands, classifying them into Jirayat, Bagayat, and Pot Kharab categories. Dissatisfied with the compensation awarded by the LAO, the landowners sought a reference to the Civil Court under Section 18 of the Land Acquisition Act, 1894. The Civil Court partly enhanced the compensation rates. The State of Maharashtra then appealed to the High Court of Judicature at Bombay under Section 54 of the Land Acquisition Act, 1894, challenging the enhancement. The High Court partly allowed the State’s appeals, reducing the compensation awarded by the Civil Court. The landowners, aggrieved by the High Court’s decision, filed appeals before the Supreme Court.

Legal Framework

The case is primarily governed by the Land Acquisition Act, 1894. Key provisions include:

• Section 4: This section empowers the government to issue a notification for the acquisition of land for public purposes.
• Section 6: This section allows the government to declare that the land is required for a public purpose after the initial notification.
• Section 11: This section deals with the inquiry and award by the Land Acquisition Officer (LAO) regarding compensation.
• Section 18: This section allows landowners to seek a reference to the Civil Court if they are dissatisfied with the LAO’s award.
• Section 54: This section provides for appeals to the High Court against the Civil Court’s decision.

The Land Acquisition Act, 1894, aims to balance the need for public development with the rights of landowners to receive fair compensation for their land. The Act ensures that landowners are adequately compensated for the loss of their property due to government acquisition.

Arguments

Appellants’ (Landowners) Arguments:

• The appellants argued that the rates determined by the Civil Court for Jirayat and Bagayat lands were just and proper and should not have been interfered with by the High Court.
• They contended that the High Court should have considered the exemplar (Ex-P-42), which showed a higher rate of land value, especially since the acquired land was agricultural.
• The appellants submitted that the principle that the price of a small piece of land cannot be applied to determine the price of a large chunk of acquired land is not applicable to agricultural land. They argued that the rate of a small piece of agricultural land can be considered for determining the value of a large chunk of agricultural land.
• They placed heavy reliance on the sale deed (Ex-42) dated 04.07.1989, arguing that the market value should be determined based on the price mentioned in this sale deed.

Respondents’ (State) Arguments:

• The State supported the High Court’s order, stating that it was well-reasoned and prayed for the dismissal of the appeals.
• The State contended that the High Court had rightly appreciated the evidence, including six sale deeds filed by both parties.
• The State relied on the sale deed dated 14.02.1994 (Ex-141), arguing that if this sale deed’s price was considered, the compensation awarded by the High Court was on the higher side and should be reduced.
• The State argued that the High Court’s decision to reduce the compensation was justified based on the evidence and the principles of land valuation.

Submissions by Parties

Issues Framed by the Supreme Court

The main issue framed by the Supreme Court was:

1. Whether the High Court was justified in partly allowing the State’s appeals and thereby reducing the rate of compensation as against what was determined by the Civil Court.

Treatment of the Issue by the Court

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

Authorities

The Court considered the following authorities:

• Sale Deed (Ex-42) dated 04.07.1989: This sale deed was presented by the landowners. The court noted that it was for a small piece of land and was executed in 1989.
• Sale Deed (Ex-141) dated 14.02.1994: This sale deed was presented by the State. The court noted that it was executed close to the date of acquisition and was for a larger chunk of land.
• Sale Deeds (Ex-140, Ex-142, Ex-124, Ex-129): These sale deeds were also considered by the court.

The Court also considered the Land Acquisition Act, 1894, specifically Sections 4, 6, 11, 18, and 54, which provide the legal framework for land acquisition and compensation.

Authorities Considered by the Court

Judgment

The Supreme Court upheld the High Court’s decision to reduce the compensation rates. The Court found that the High Court had rightly appreciated the evidence, particularly the six sale deeds presented by both parties. The Court emphasized that the sale deed (Ex-141) dated 14.02.1994, was the most relevant as it was closest to the date of acquisition and was for a larger chunk of land. The Court rejected the appellants’ argument that the price of a small piece of agricultural land could be used to determine the value of a large chunk of land. The Court noted that the High Court had considered all the evidence and had come to a reasoned conclusion.

Treatment of Submissions by the Court

How each authority was viewed by the Court?

• Sale Deed (Ex-42) dated 04.07.1989: The Court did not rely on this sale deed, stating that it was old and for a small piece of land.
• Sale Deed (Ex-141) dated 14.02.1994: The Court heavily relied on this sale deed as it was close to the date of acquisition and for a larger chunk of land.
• Sale Deeds (Ex-140, Ex-142, Ex-124, Ex-129): The Court considered these sale deeds as part of the overall evidence but did not give them as much weight as Ex-141.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the following factors:

• Proximity to Acquisition Date: The Court gave significant weight to the sale deed (Ex-141) dated 14.02.1994, because it was executed very close to the date of acquisition (03.03.1994), making it a more reliable indicator of market value at the time of acquisition.
• Size of Land: The Court emphasized that the sale deed (Ex-141) was for a larger chunk of land. This was contrasted with the appellants’ reliance on Ex-42, which was for a smaller piece of land. The Court favored the sale deed for a larger land because it was more representative of the market value of the acquired land.
• Evidence Appreciation: The Court agreed with the High Court’s assessment of all the evidence, including the six sale deeds presented by both parties. The Court found that the High Court had rightly concluded that the compensation rates determined by the Civil Court were on the higher side.
• Rejection of Small Land Price Principle: The Court rejected the argument that the price of a small piece of agricultural land can be used to determine the value of a large chunk of agricultural land. The Court did not accept this submission.

Logical Reasoning

The Court’s reasoning was based on the principle that the market value of land should be determined by considering comparable sales that are proximate in time and involve similar land sizes. The Court rejected the argument that the nature of land being agricultural warrants a different approach.

The Supreme Court stated:

“In our opinion, the relevant sale deed to determine the market value of the suit land is (EX-141), which is dated 14.02.1994. This we say for two reasons. First, it is very near to the date of acquisition (03.03.1994); and Second, it is for a larger chunk of land.”

“Having examined the issue, we cannot place exclusive reliance on Ex-P-42 as was urged by the learned counsel for the appellants neither for restoring the rates determined by the Civil Court and nor for making any further enhancement in the rates determined by the High Court.”

“In our opinion, the High Court, therefore, rightly took into consideration all the six sale deeds and then on appreciation of entire evidence rightly came to a conclusion that the rates determined by the Civil Court in relation to Jirayat and Bagayat lands appeared to be on higher side and hence need to be reduced.”

Key Takeaways

• The market value of land for compensation purposes should be determined based on sale deeds that are proximate to the date of acquisition and involve similar land sizes.
• The principle that the price of a small piece of land cannot be applied to determine the price of a large chunk of land applies to agricultural land as well.
• Courts must consider all relevant evidence, including sale deeds presented by both parties, when determining compensation for acquired land.
• The High Court’s decision to reduce the compensation was upheld because it was based on a proper appreciation of evidence and legal principles.

Directions

No specific directions were given by the Supreme Court in this case. The Court dismissed the appeals, upholding the High Court’s decision.

Development of Law

The ratio decidendi of this case is that when determining compensation for land acquisition, courts must prioritize sale deeds that are proximate to the date of acquisition and involve comparable land sizes. This case clarifies that the principle against using small land sales to determine the value of large land acquisitions applies to agricultural land as well. There is no change in the previous position of law, but the Supreme Court has reiterated the importance of considering the proximity of sale deeds to the date of acquisition and the size of the land involved.

Conclusion

The Supreme Court dismissed the appeals, upholding the Bombay High Court’s decision to reduce the compensation rates for land acquired for the Mukane Dam project. The Court emphasized the importance of considering sale deeds that are proximate to the date of acquisition and involve similar land sizes. The Court reiterated that the principle against using small land sales to determine the value of large land acquisitions applies to agricultural land as well.