Supreme Court Revises Land Acquisition Compensation for Haryana Villages: Balwan Singh vs. State of Haryana (2022)

Date of the Judgment: 18 May 2022

Citation: (2022) INSC 486

Judges: M.R. Shah, J., B.V. Nagarathna, J.

How should compensation be determined when the government acquires land for public purposes? The Supreme Court of India recently addressed this question in a series of appeals concerning land acquisitions in Haryana. The core issue revolved around the appropriate market value of the acquired land and the deductions that should be applied when using sale instances of smaller plots to value larger tracts of land. The Court considered appeals from both landowners and the acquiring body, the State of Haryana, concerning land in villages Kheri Sadh and Baliyana. This judgment clarifies how courts should approach valuation in land acquisition cases.

Case Background

The case involves multiple appeals concerning land acquisitions in two villages in Haryana: Kheri Sadh and Baliyana. The lands were acquired by the State of Haryana for the development of an Industrial Model Township in Rohtak. The acquisition process was carried out in two phases for Kheri Sadh, with notifications issued under Section 4 of the Land Acquisition Act, 1894 on 9 June 2006 (First Phase) and 13 February 2008 (Second Phase). For Baliyana, the notification was issued on 9 June 2006. Landowners challenged the compensation awarded by the Land Acquisition Officer, leading to references to the Reference Court and subsequent appeals to the High Court of Punjab and Haryana at Chandigarh. The landowners sought higher compensation, while the State sought to reduce the compensation awarded.

Timeline:

Course of Proceedings

The Land Acquisition Officer initially awarded compensation at Rs. 16,00,000 per acre for all types of land in both villages. Dissatisfied, the landowners sought references under Section 18 of the Land Acquisition Act, 1894. The Reference Court enhanced compensation for Kheri Sadh land, differentiating between land abutting the highway and other land. The High Court, in its initial judgment, further increased the compensation for the highway-abutting land in Kheri Sadh but maintained the compensation for other lands. For Baliyana, the High Court upheld the Reference Court’s decision, which had awarded a lower compensation than that for Kheri Sadh, noting differences in location and potential. The Supreme Court then heard appeals from both the landowners seeking further enhancement and the State seeking a reduction in compensation.

Legal Framework

The core legal framework for this case is the Land Acquisition Act, 1894. This Act provides the mechanism for the government to acquire private land for public purposes. Key provisions include:

• Section 4: This section deals with the publication of a preliminary notification for the acquisition of land.
• Section 6: This section deals with the declaration of intended acquisition.
• Section 18: This section allows landowners dissatisfied with the compensation awarded by the Land Acquisition Officer to seek a reference to the court for determination of fair compensation.

The determination of compensation is based on the market value of the land at the time of the Section 4 notification. The courts consider various factors, including sale instances of comparable land, potential of the land, and the nature of the land. The Supreme Court also referred to Section 25 of the Land Acquisition Act, 1894 which specifies that the compensation awarded by the court cannot be lower than that awarded by the Land Acquisition Officer.

Arguments

Submissions by Landowners (Kheri Sadh – First Phase):

• The landowners argued that the highest sale exemplar (Ex. P3), showing a rate of Rs. 46,45,714.22 per acre, should be the basis for compensation.
• They contended that even if a cut is applied, it should not exceed 40%, referencing the case of Ashrafi & Others v. State of Haryana and others, (2013) 5 SCC 527, which suggested a 33% cut.
• They argued that no cut should be applied due to the area’s development and potential.
• They also argued that the High Court should have proportionally increased compensation for lands beyond one acre from the highway, as it did for the highway-abutting land.

Submissions by Landowners (Kheri Sadh – Second Phase):

• The landowners argued that the 12% annual escalation granted by the High Court was inadequate, given the rapid development and economic activity in the area.

Submissions by Landowners (Baliyana):

• The landowners argued that the land in Baliyana, being adjacent to Kheri Sadh and acquired for the same purpose, should receive the same compensation as Kheri Sadh.
• They relied on an allotment letter dated 13 August 2009, showing that 700 acres in Baliyana were allotted to Maruti Suzuki India Limited at Rs. 75,00,000 per acre.

Submissions by State/Acquiring Body:

• The State argued that the courts below erred in not considering sale exemplars (Ex. R2, R3, R4, and R5) showing lower prices than the Land Acquisition Officer’s award.
• They contended that Section 25 of the Land Acquisition Act, 1894 does not prohibit considering sale exemplars with prices lower than the Land Acquisition Officer’s award.
• They argued that Ex. R2, being the closest sale deed before the notification date, should be relied upon.
• They argued that sale exemplars Ex. R3, R4, and R5, though executed after the notification, provide a good picture of the market value.
• The State argued that sale deeds executed by private builders (Ex. P8 and P9) should not be relied upon, as they purchase land at any cost for profit.
• They contended that a cut of 50% to 75% should be applied due to the large, undeveloped nature of the acquired land, citing cases like Basavva v. Land Acquisition Officer, (1996) 9 SCC 640 and others.
• The State argued that the High Court erred in applying a cut of only 10% instead of 20%.
• The State argued that the acquired land was agricultural and should not be compensated as commercial land.
• For Baliyana, the State argued that its location was inferior to Kheri Sadh, justifying lower compensation.
• The State argued that the allotment letter to Maruti Suzuki was irrelevant because it was three years after the Section 4 notification and the land was developed.

[TABLE] of Submissions

Issues Framed by the Supreme Court

The Supreme Court addressed the following key issues:

1. What is the appropriate method for determining compensation for acquired land, particularly when relying on sale instances of smaller plots?
2. What is the appropriate cut to be applied when valuing large tracts of undeveloped agricultural land based on sale instances of smaller plots?
3. Whether the High Court was justified in applying a 10% cut instead of 20% for the acquired land in Kheri Sadh.
4. Whether the High Court was correct in determining the compensation for the acquired land of village Baliyana at Rs. 17,00,000/- per acre.
5. Whether the High Court was justified in granting a 12% escalation for the second phase of acquisition in Kheri Sadh.

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:

Cases:

Legal Provisions:

Judgment

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

How each authority was viewed by the Court?

• The Court referred to Ashrafi & Others v. State of Haryana and others, (2013) 5 SCC 527, but did not follow the 33% cut, stating that the cut can range from 20% to 75%.
• The Court relied on Basavva v. Land Acquisition Officer, (1996) 9 SCC 640 and other cases to emphasize the need for a cut of 50% to 75% for large, undeveloped land.
• The Court followed Haryana State Agricultural Market Board v. Krishan Kumar, (2011) 15 SCC 297, stating appropriate deductions must be made for roads, drains, and development costs.
• The Court relied on Lal Chand v. Union of India, (2009) 15 SCC 769, stating that deductions of 20% to 75% can be made for undeveloped land.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the need to strike a balance between fair compensation for landowners and the practical realities of land acquisition for public purposes. The court emphasized that while landowners should receive just compensation, the valuation process must also account for the fact that large tracts of undeveloped land require significant investment for development. The court was also influenced by the fact that the sale exemplars that were relied upon were of small plots of land and not comparable to the large tracts of land that were acquired. The court also considered the location of the land and the potential of the land at the time of acquisition.

Sentiment Analysis of Reasons Given by the Supreme Court

Ratio of Fact:Law

Logical Reasoning

The Court rejected the landowners’ argument for using the highest sale exemplar without considering the nature of the land. It also rejected the State’s argument for using lower-priced sale exemplars, emphasizing that the compensation should not be lower than the Land Acquisition Officer’s award. The Court’s decision reflects a careful consideration of both factual and legal aspects, aiming to provide a just outcome.

The Court stated, “Therefore, as such, the High Court has committed a grave error in applying the cut of 10% only instead of 20% as applied by the Reference Court.”

The Court further stated, “Therefore, the original claimants/landowners shall be entitled to the compensation determined by the Reference Court at the rate of Rs.24,00,000/- per acre for the acquired land up to depth of one acre abutting highway and for the remaining land of village Kheri Sadh, the landowners/original claimants shall be entitled to compensation at the rate of Rs. 19,77,000/- per acre, as determined by the Reference Court after applying the cut of 38%.”

Additionally, the Court noted, “Therefore, in the facts and circumstances of the case, the High Court has rightly determined the compensation at Rs. 17,00,000/- per acre for the lands acquired of village Baliyana for which the notification under Section 4 of the Act was issued on 9.6.2006.”

Key Takeaways

• When determining compensation for acquired land, courts must consider the nature of the land, its potential, and the size of the acquired area.
• Sale instances of smaller plots should not be directly applied to large tracts of undeveloped land; appropriate deductions (cuts) must be made.
• Cuts for undeveloped agricultural land can range from 20% to 75%, depending on the facts of the case.
• The location and potential of the land are crucial factors in determining compensation.
• The compensation cannot be lower than what was awarded by the Land Acquisition Officer.

Directions

The Supreme Court directed that the original claimants/landowners of Kheri Sadh (First Phase) shall be entitled to compensation at Rs. 24,00,000 per acre for land up to one acre abutting the highway and Rs. 19,77,000 per acre for the remaining land. For the Second Phase of acquisition in Kheri Sadh, the landowners were entitled to Rs. 28,80,000 per acre for land up to one acre abutting the highway and Rs. 23,72,400 per acre for the remaining land. The landowners of Baliyana were entitled to compensation at Rs. 17,00,000 per acre. All landowners were to receive statutory benefits.

Development of Law

The ratio decidendi of this case is that when determining compensation for large tracts of undeveloped agricultural land, courts must apply appropriate deductions (cuts) ranging from 20% to 75% based on the facts of the case. This judgment reinforces the principle that sale instances of small developed plots cannot be directly applied to large undeveloped tracts and that the location and potential of the acquired land are crucial factors in determining compensation. This case also reinforces that the compensation cannot be lower than what was awarded by the Land Acquisition Officer. There is no change in the previous position of the law, but this case reinforces the existing position of the law.

Conclusion

The Supreme Court’s judgment in Balwan Singh vs. State of Haryana clarifies the method for determining fair compensation in land acquisition cases. The Court emphasized the need to apply appropriate cuts when using sale instances of smaller plots to value larger tracts of undeveloped agricultural land. The Court also highlighted the importance of considering location and potential when determining compensation. The decision provides a clear framework for future land acquisition cases, balancing the interests of landowners and the need for public development.

Category

Parent Category: Land Acquisition Act, 1894

Child Categories:

• Section 4, Land Acquisition Act, 1894
• Section 6, Land Acquisition Act, 1894
• Section 18, Land Acquisition Act, 1894
• Section 25, Land Acquisition Act, 1894
• Fair Compensation
• Market Value
• Land Valuation
• Eminent Domain
• Public Purpose
• Haryana Land Acquisition

FAQ

Q: What is the main issue in this Supreme Court case?

A: The main issue is how to determine fair compensation for land acquired by the government, especially when the land is a large, undeveloped agricultural area.

Q: What is a “cut” in land acquisition cases?

A: A “cut” refers to a deduction applied to the value of smaller, developed plots when using their sale price to determine the value of larger, undeveloped tracts of land. This deduction accounts for the cost of development and infrastructure.

Q: What range of cuts did the Supreme Court consider appropriate?

A: The Supreme Court stated that cuts ranging from 20% to 75% can be applied, depending on the specificcircumstances of the case.

Q: Why was the compensation for Baliyana land lower than that for Kheri Sadh?

A: The Supreme Court found that the location of Baliyana was inferior to Kheri Sadh, justifying the lower compensation.

Q: What is the significance of Section 25 of the Land Acquisition Act, 1894 in this case?

A: Section 25 states that the court cannot award compensation lower than what was awarded by the Land Acquisition Officer. This was a key factor in the Court’s decision.