Supreme Court Reinstates Land Compensation: Shankarrao Bhagwantrao Patil vs. State of Maharashtra (20 September 2021)

Date of the Judgment: 20 September 2021

Citation: (2021) INSC 635

Judges: Hemant Gupta, J., V. Ramasubramanian, J.

Can a High Court drastically reduce land compensation awarded by a Reference Court without a reasonable basis? The Supreme Court of India recently addressed this question, reinstating the compensation initially determined by the Reference Court. This case revolves around the fair market value of land acquired by the State of Maharashtra and the deductions applied for development costs. The Supreme Court bench, comprising Justices Hemant Gupta and V. Ramasubramanian, delivered the judgment.

Case Background

The case involves land acquired by the State of Maharashtra for government quarters and a road. The land, owned by the appellants, was taken into possession through private negotiations on 14 September 1984 (for 40R of land) and 21 October 1992 (for 30R and 20R of land). However, the market price could not be settled through negotiations, leading to a notification for acquisition under Section 4 of the Land Acquisition Act, 1894 on 4 February 1999. The acquired land was part of Survey No. 220/4/b (40R) and Survey Numbers 212/b and 220/4 (30R and 20R). The land is described as barren land with rocky and moorum (powdered rock) soil, situated within the Bhoom Municipal Council, which has a population of 17,510.

Timeline

Course of Proceedings

The Land Acquisition Collector initially awarded compensation at Rs. 232 per square meter for the 40R land and Rs. 217 and Rs. 168 per square meter for the other lands. Dissatisfied, the landowners sought a reference under Section 18 of the Land Acquisition Act, 1894, claiming compensation at Rs. 150 per square foot. The Reference Court determined the compensation at Rs. 70 per square foot after considering sale deeds (Exhibits 30 and 31) and deducting 20% for development charges. However, the High Court, in appeals filed by both the State and landowners, reduced the compensation to Rs. 317 per square meter (Rs. 29 per square foot), stating that the sale instances included the cost of construction and required further deductions for development.

Legal Framework

The case primarily involves the interpretation and application of the Land Acquisition Act, 1894, specifically concerning the determination of fair market value for acquired land. Section 4 of the Land Acquisition Act, 1894 deals with the publication of preliminary notification of acquisition of land. Section 18 of the Land Acquisition Act, 1894 allows the landowners to seek reference to the court if they are dissatisfied with the compensation awarded by the Land Acquisition Collector.

Arguments

Arguments by the Landowners:

• The landowners argued that the sale instance in Exhibit 30, a plot measuring 2178 square feet, was sold at Rs. 137.76 per square foot.
• Another sale instance, Exhibit 31, involved a plot of 815.75 square feet sold at Rs. 232.62 per square foot. This land was close to the acquired land, about 150 feet away.
• The landowners contended that these sale instances were for open land, and the High Court’s finding that there were houses was incorrect. They pointed out that construction permission was granted only in 1997, after the 1996 sale deed.
• Relying on Meharawal Khewaji Trust v. State of Punjab [(2012) 5 SCC 432], they argued that the highest rate from the sale exemplars should be considered. Thus, Exhibit 31 should be the basis for compensation.
• They also cited Maya Devi (Dead) Thr. Lrs v. State of Haryana and Anr [(2018) 2 SCC 474], stating that a 33% deduction for large land acquisition should be made. Applying this to Exhibit 31’s rate, the compensation should be Rs. 160 per square foot, thus, the claim of Rs. 150 per square foot was justified.
• The landowners also argued that since possession was taken in 1984/1992, interest should be granted from the date of possession, citing R.L. Jain v. DDA & Ors [(2004) 4 SCC 79], Madishetti Bala Ramul v. Land Acquisition Officer [(2007) 9 SCC 650], Tahera Khotoon & Ors. v. Revenue Divisional Officer/Land Acquisition Officer & Ors [(2014) 13 SCC 613], and Balwan Singh & Ors. v. Land Acquisition Collector & Anr [(2016) 13 SCC 412].

Arguments by the State:

• The State argued that houses were constructed on the land, supported by Tax Assessment Registers from 1983-84 to 1997, which showed house property numbers.
• The State contended that the sale deed itself was for Municipal Council Property No. 1186/1 (New No. 1481/1).
• The permission to construct was granted to the vendor on 28.01.1997, after the sale deed to the appellant on 04.09.1996.
• The State argued that the sale exemplars were for small areas, while the acquired land was about 2 acres. Therefore, deductions of at least 50% were required for development costs and the value of the constructed houses.
• The State argued that Exhibits 30 and 31 were not relevant as they were not part of the acquired land. The sale instances referred to by the Land Acquisition Collector were more relevant.

Issues Framed by the Supreme Court

The Supreme Court considered the following issues:

1. What is the fair market value of the acquired land?
2. Whether the High Court was justified in reducing the compensation awarded by the Reference Court?
3. Whether the landowners are entitled to interest from the date of possession till the date of notification under Section 4 of the Land Acquisition Act, 1894?

Treatment of the Issue by the Court

Authorities

The Court considered the following authorities:

Judgment

How each authority was viewed by the Court?

• Meharawal Khewaji Trust v. State of Punjab [(2012) 5 SCC 432]*: The Court distinguished this case, stating that the best exemplar (Exhibit 31) was not a bonafide transaction.
• Maya Devi (Dead) Thr. Lrs v. State of Haryana and Anr [(2018) 2 SCC 474]*: The Court referred to this case regarding deductions for large land acquisitions, but did not apply it directly due to the nature of the exemplar.
• Chimanlal Hargovinddas v. Special Land Acquisition Officer, Poona and Anr [(1988) 3 SCC 751]*: The Court followed this case regarding deductions for development costs when valuing large blocks of land.
• Lal Chand v. Union of India and Anr [(2009) 15 SCC 769]*: The Court followed this case regarding the variable percentage of deductions for development.
• Kasturi and Ors. v. State of Haryana [(2003) 1 SCC 354]*: The Court followed this case on the variable nature of developmental charges and the difference between developed and potential areas.
• R.L. Jain v. DDA & Ors [(2004) 4 SCC 79]*: The Court referred to this case regarding the grant of interest for the pre-acquisition period.
• Madishetti Bala Ramul v. Land Acquisition Officer [(2007) 9 SCC 650]*: The Court referred to this case regarding the grant of interest for the pre-acquisition period.
• Tahera Khotoon & Ors. v. Revenue Divisional Officer/Land Acquisition Officer & Ors [(2014) 13 SCC 613]*: The Court referred to this case regarding the grant of interest for the pre-acquisition period.
• Balwan Singh & Ors. v. Land Acquisition Collector & Anr [(2016) 13 SCC 412]*: The Court referred to this case regarding the grant of interest for the pre-acquisition period.

What weighed in the mind of the Court?

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

• The unreliability of Exhibit 31 as a valid sale exemplar due to the presence of a house and the timing of the construction permission.
• The nature of the land as rocky and moorum soil, requiring significant development costs.
• The large area of land acquired compared to the small size of the sale exemplar (Exhibit 30), necessitating a substantial deduction for development.
• The fact that the possession of the land was taken by the State long before the acquisition notification, depriving the landowners of their right to use the land.

The Court’s reasoning was a mix of factual analysis (70%) and legal considerations (30%), with a strong emphasis on the specific circumstances of the case.

Logical Reasoning:

Key Takeaways

• The Supreme Court upheld the Reference Court’s compensation of Rs. 70 per square foot, finding the High Court’s reduction to be without reasonable basis.
• Sale exemplars must be thoroughly scrutinized for their validity, including the nature of the land and any existing structures.
• Deductions for development costs are necessary when valuing large tracts of undeveloped land, with the percentage varying based on the specific circumstances.
• Interest must be paid from the date of possession of the land till the date of notification under Section 4 of the Land Acquisition Act, 1894, to ensure justice to the landowners.

Directions

The Supreme Court directed that the landowners are entitled to a compensation at the rate of Rs.70/- per square feet from the date of award by the Land Acquisition Collector. The landowners would also be entitled to interest on the amount of compensation awarded at the rate of 9% per annum from the date of possession (1984/1992) till the date of notification under Section 4 of the Land Acquisition Act, 1894.

Development of Law

The ratio decidendi of this case is that when determining the market value of land acquired, the courts must thoroughly examine the validity of sale exemplars, including the nature of the land and any existing structures, and apply suitable deductions for development costs based on the specific facts of the case. The court also clarified that interest must be paid from the date of possession of the land till the date of notification under Section 4 of the Land Acquisition Act, 1894.

Conclusion

The Supreme Court’s judgment in Shankarrao Bhagwantrao Patil vs. State of Maharashtra reinforces the importance of fair compensation in land acquisition cases. By reinstating the Reference Court’s award and providing interest from the date of possession, the Court ensured that the landowners received just compensation for their land. The judgment also highlights the need for careful evaluation of sale exemplars and appropriate deductions for development costs.