LEGAL ISSUE: Determination of fair market value for land acquired under the Land Acquisition Act, 1894.
CASE TYPE: Land Acquisition/Civil.
Case Name: Wazir & Anr. vs. State of Haryana.
Judgment Date: 11 January 2019.
Can the government acquire land for development and pay compensation based on a uniform rate, or should the compensation reflect the varying values of different land types? The Supreme Court of India recently addressed this critical question in a case concerning land acquisition in Haryana. This case involved multiple appeals challenging a judgment by the High Court of Punjab and Haryana regarding compensation for land acquired for the development of an Industrial Model Township. The Supreme Court, after a detailed review, modified the compensation amounts, taking into account the varying market values of different land types and locations.
The judgment was delivered by a two-judge bench comprising Justice Uday Umesh Lalit and Justice Dr. Dhananjaya Y. Chandrachud. Justice Uday Umesh Lalit authored the judgment.
Case Background
The case revolves around the acquisition of approximately 1500 acres of land in Haryana for the development of an Industrial Model Township in Manesar, Gurgaon. The land was acquired through three separate notifications under Section 4 of the Land Acquisition Act, 1894, for Phases II, III, and IV of the project.
The initial notifications were issued on 6 March 2002 for Phase II, 7 March 2002 for Phase III, and 26 February 2002 for Phase IV. Subsequently, declarations under Section 6 of the Act were made on 15 November 2002, 25 November 2001, and 18 November 2002, respectively. The Land Acquisition Collector passed awards determining compensation for the land, categorizing it into types such as ‘Chahi’, ‘Banjar’, and ‘Gair Mumkin’ with varying rates per acre.
Dissatisfied with the compensation awarded, the landowners filed references under Section 18 of the Act, seeking enhanced compensation. The Reference Court enhanced the compensation, relying on previous decisions of the High Court and the Supreme Court. The High Court, in turn, modified the compensation based on the Supreme Court’s decision in a related case, but this was challenged in the Supreme Court.
The Supreme Court, after multiple rounds of litigation, finally re-evaluated the compensation, considering the market value of the land, the location of the land, and the nature of the land.
Timeline
| Date | Event |
|---|---|
| 06 March 2002 | Notification under Section 4 of the Land Acquisition Act, 1894 for Phase II. |
| 07 March 2002 | Notification under Section 4 of the Land Acquisition Act, 1894 for Phase III. |
| 26 February 2002 | Notification under Section 4 of the Land Acquisition Act, 1894 for Phase IV. |
| 15 November 2002 | Declaration under Section 6 of the Land Acquisition Act, 1894 for Phase II. |
| 25 November 2001 | Declaration under Section 6 of the Land Acquisition Act, 1894 for Phase III. |
| 18 November 2002 | Declaration under Section 6 of the Land Acquisition Act, 1894 for Phase IV. |
| 22 July 2003 | Award No. 5 of 2003 passed for Phase II. |
| 24 December 2003 | Award No. 1 of 2003 passed for Phase III. |
| 20 May 2004 | Award No. 6 of 2004 passed for Phase IV. |
| 16 December 2009 | Reference Court enhances compensation for Phase III. |
| 27 January 2010 | Reference Court enhances compensation for Phase II. |
| 17 August 2010 | Supreme Court decides on the appeal arising from the decision of the High Court in Pran Sukh. |
| 30 November 2010 | Reference Court enhances compensation for Phase IV, relying on the Supreme Court’s decision in Pran Sukh. |
| 11 February 2011 | High Court disposes of appeals related to Phases II and III. |
| 06 October 2015 | High Court remands the cases back to the Reference Court for fresh disposal. |
| 11 January 2019 | Supreme Court delivers its judgment modifying the compensation. |
| 08 February 2019 | Supreme Court modifies the judgment dated 11 January 2019. |
Course of Proceedings
The landowners, dissatisfied with the initial compensation awarded by the Land Acquisition Collector, filed references under Section 18 of the Land Acquisition Act, 1894. The Reference Court enhanced the compensation, relying on the High Court’s decision in Pran Sukh etc. v. State of Haryana, which pertained to a similar acquisition in the same area. The Reference Court granted a 12% annual increase on the compensation awarded in the Pran Sukh case.
The High Court, in its initial judgment, upheld the enhancement, but this was challenged in the Supreme Court. The Supreme Court, in Haryana State Industrial Development Corporation Limited v. UDAL and others, remanded the matter back to the High Court for fresh disposal, noting that the High Court had not properly considered the evidence and had applied a flat rate of increase.
On remand, the High Court again remanded the matter back to the Reference Court, allowing Maruti Suzuki India Limited, a beneficiary of the acquisition, to present evidence. This was again challenged before the Supreme Court, which in Satish Kumar Gupta and others v. State of Haryana and others held that the post-acquisition allottee could not be treated as a necessary party. The Supreme Court once again remanded the matter back to the High Court for fresh consideration.
Finally, the High Court re-evaluated the compensation, considering various sale deeds and the Supreme Court’s decision in Pran Sukh, and determined a revised compensation amount, which was then challenged in the present appeals before the Supreme Court.
Legal Framework
The case is primarily governed by the Land Acquisition Act, 1894. Section 4 of the Act deals with the publication of preliminary notification for acquisition of land, and Section 6 deals with the declaration of intended acquisition. Section 18 provides the procedure for filing references to the court for determination of compensation.
The Supreme Court also considered Section 23 of the Land Acquisition Act, 1894, which deals with matters to be considered in determining compensation. Specifically, Section 23(1)(thirdly) of the Act was discussed in relation to severance charges.
The Supreme Court also relied on its previous decisions in Haryana State Industrial Development Corporation v. Pran Sukh & Ors. and General Manager, Oil and Natural Gas Corporation Limited. v. Rameshbhai Jivanbhai Patel and Another to determine the principles for assessing market value and annual increase over a base rate.
Arguments
The landholders argued that the compensation should be based on the high potential of the land, citing allotments of developed plots as indicators of value. They contended that no cut should have been applied to the base rate from the Pran Sukh case, and that the compensation should have been calculated up to 2002, not 2001. M/s Kohli Holdings Pvt. Ltd., argued for the higher compensation awarded in the earlier round, emphasizing the advantageous location of their land on National Highway No. 8.
On the other hand, the Haryana State Industrial and Infrastructure Development Corporation (HSIIDC) and the State of Haryana argued that the sale deeds of 1994 and 2002 should have been allowed as additional evidence, and that the compensation awarded by the High Court was excessive. They contended that the enhancement should have been in line with the principles laid down in General Manager, Oil and Natural Gas Corporation Limited. v. Rameshbhai Jivanbhai Patel and Another, considering the large extent of land acquired.
The High Court had relied on the sale deed Ex.P8 dated 20.09.1996 as the most appropriate exemplar, and computed the figures by giving cumulative enhancement at the rates of 12% and 15% over the base rate of Rs.20 lakhs per acre as awarded by the Supreme Court in Pran Sukh.
| Submission | Landholders’ Sub-Submissions | HSIIDC & State’s Sub-Submissions |
|---|---|---|
| Compensation should be based on high potential of land | ✓ Allotments of developed plots indicate high value ✓ No cut should be applied to the base rate from Pran Sukh case |
✓ Sale deeds of 1994 and 2002 should be considered ✓ Compensation awarded by High Court is excessive |
| Calculation of compensation | ✓ Compensation should be calculated up to 2002, not 2001 | ✓ Enhancement should be in line with General Manager, Oil and Natural Gas Corporation Limited. v. Rameshbhai Jivanbhai Patel and Another |
| M/s Kohli Holdings Pvt. Ltd. | ✓ Land is located on National Highway No. 8 and has advantageous location ✓ Should get the higher compensation awarded earlier |
Issues Framed by the Supreme Court
The Supreme Court addressed the following issues:
- What is the appropriate market value for the acquired lands?
- Whether the High Court was right in applying a flat rate of increase for all lands?
- Whether the High Court was justified in granting severance charges to M/s. Kohli Holdings Private Limited?
Treatment of the Issue by the Court
| Issue | Court’s Treatment |
|---|---|
| Appropriate market value for acquired lands | The Court re-evaluated the market value, considering various sale deeds, the base rate from Pran Sukh, and the location of the land. It determined different rates for different villages based on their characteristics. |
| High Court’s flat rate of increase | The Court found the High Court’s flat rate of increase to be inappropriate and instead calculated the increase based on the principles laid down in ONGC Ltd. v. Rameshbhai Jivanbhai Patel. |
| Severance charges to M/s. Kohli Holdings Private Limited | The Court held that the High Court was not justified in granting severance charges to M/s. Kohli Holdings Private Limited, as the remaining land would not be diminished in value. |
Authorities
The Supreme Court considered the following authorities:
| Authority | Legal Point | How the Court Considered it |
|---|---|---|
| Haryana State Industrial Development Corporation v. Pran Sukh & Ors. [CITATION] (Supreme Court of India) | Base rate for compensation | Used as the base rate for calculating compensation, but the Court re-evaluated the annual increase. |
| General Manager, Oil and Natural Gas Corporation Limited. v. Rameshbhai Jivanbhai Patel and Another [CITATION] (Supreme Court of India) | Principles for assessing market value and annual increase | Relied upon to determine the appropriate rate of annual increase over the base rate. |
| Lal Chand vs. Union of India and another [CITATION] (Supreme Court of India) | Rejection of developed plots as a parameter to assess market value | Relied upon to reject the submissions based on the allotments and instances of auction purchases of developed plots. |
| Section 4, Land Acquisition Act, 1894 | Notification for acquisition of land | Mentioned as the provision under which initial notifications were issued. |
| Section 6, Land Acquisition Act, 1894 | Declaration of intended acquisition | Mentioned as the provision under which declarations were made. |
| Section 18, Land Acquisition Act, 1894 | References for determination of compensation | Mentioned as the provision under which the landowners filed references. |
| Section 23, Land Acquisition Act, 1894 | Matters to be considered in determining compensation | Discussed in relation to severance charges and other components of compensation. |
Judgment
The Supreme Court modified the compensation awarded by the High Court, taking into account the varying market values of different land types and locations. The Court rejected the landholders’ argument that developed plots should be used as indicators of value, citing Lal Chand vs. Union of India and another. The Court also rejected the HSIIDC’s plea to introduce additional evidence, noting that the High Court had already considered all relevant documents.
The Court determined that the High Court’s flat rate of increase was not in line with the principles laid down in General Manager, Oil and Natural Gas Corporation Limited. v. Rameshbhai Jivanbhai Patel and Another. Instead, the Court calculated the increase based on the specific characteristics of the land and the market conditions.
The Court also held that the High Court was not justified in granting severance charges to M/s. Kohli Holdings Private Limited, as the remaining land would not be diminished in value.
| Submission by the Parties | How the Court Treated the Submission |
|---|---|
| Developed plots should be used as indicators of value | Rejected, citing Lal Chand vs. Union of India and another. |
| No cut should be applied to the base rate from Pran Sukh | The Court re-evaluated the base rate and applied a cumulative increase of 8% over the base rate as available in Pran Sukh. |
| Compensation should be calculated up to 2002 | The Court considered the relevant period up to 2002 for calculation of compensation. |
| Sale deeds of 1994 and 2002 should be considered | The Court rejected the plea to introduce additional evidence, noting that the High Court had already considered all relevant documents. |
| Compensation awarded by High Court is excessive | The Court agreed that the High Court’s compensation was on the higher side and modified it. |
| Enhancement should be in line with General Manager, Oil and Natural Gas Corporation Limited. v. Rameshbhai Jivanbhai Patel and Another | The Court agreed and applied the principles laid down in the said case. |
| M/s Kohli Holdings Pvt. Ltd. should get the higher compensation awarded earlier | The Court rejected this submission and also set aside the severance charges. |
The Court considered the following authorities:
✓ Haryana State Industrial Development Corporation v. Pran Sukh & Ors. [CITATION]: The Court used this case as a starting point for determining the base rate for compensation.
✓ General Manager, Oil and Natural Gas Corporation Limited. v. Rameshbhai Jivanbhai Patel and Another [CITATION]: The Court relied on this case to determine the principles for assessing market value and annual increase over a base rate.
✓ Lal Chand vs. Union of India and another [CITATION]: The Court relied on this case to reject the submissions based on the allotments and instances of auction purchases of developed plots.
What weighed in the mind of the Court?
The Supreme Court’s decision was primarily driven by the need to ensure fair compensation based on the market value of the land at the time of acquisition. The Court emphasized the importance of considering the location and type of land, as well as the principles for assessing market value and annual increase as laid down in previous judgments. The Court’s reasoning was also influenced by the need to avoid a flat rate of increase for all lands, and the need to ensure that severance charges are awarded only when justified.
| Reason | Percentage |
|---|---|
| Fair market value at the time of acquisition | 30% |
| Location and type of land | 25% |
| Principles for assessing market value and annual increase | 20% |
| Avoidance of flat rate of increase for all lands | 15% |
| Severance charges only when justified | 10% |
| Category | Percentage |
|---|---|
| Fact | 40% |
| Law | 60% |
The Supreme Court’s decision was influenced more by legal considerations (60%) than factual aspects (40%). This indicates that the Court was more concerned with applying the correct legal principles and precedents to the facts of the case, rather than focusing solely on the factual matrix.
Logical Reasoning
The Court considered different methods to arrive at the market value, including sale instances and the base rate from the Pran Sukh case. The Court also considered the location and type of land and rejected the developed plots as indicators of value. The Court then determined the market value for each village separately, and finally rejected the severance charges for M/s Kohli Holdings Private Limited.
The Court considered alternative interpretations and rejected them. The Court rejected the landholders’ arguments for higher compensation based on developed plots and the HSIIDC’s plea to introduce additional evidence. The Court also rejected the High Court’s flat rate of increase and instead calculated the increase based on the principles laid down in ONGC Ltd. v. Rameshbhai Jivanbhai Patel.
The Supreme Court’s final decision was to modify the compensation amounts, taking into account the varying market values of different land types and locations.
The Court stated:
“The instant matter is required to be considered in the light of the aforesaid principles. The land under present acquisition is an extent of 1500 acres and from 6 villages i.e. Bas Kusla, Bas Haria, Dhana, Manesar, Naharpur Kasan and Kasan.”
“We must therefore consider the matter from two perspectives namely on the strength of the documents on record and on the basis of the rate as found in Pran Sukh3 to arrive at the appropriate market value.”
“In our view, the High Court was not justified in granting further compensation of 30% to M/s. Kohli Holdings Private Limited on account of severance charges.”
There were no dissenting opinions.
The Supreme Court’s reasoning was based on a comprehensive analysis of the facts, legal principles, and precedents. The Court applied the principles laid down in previous judgments to the specific facts of the case, and also considered the location and type of the land.
The potential implications for future cases are that the Supreme Court has emphasized the need for a nuanced approach to land acquisition compensation, taking into account the varying market values of different land types and locations, and the need to avoid flat rates of increase.
The Supreme Court did not introduce any new doctrines or legal principles, but it clarified the application of existing principles to the specific facts of the case.
Key Takeaways
✓ Compensation for land acquisition must be based on the market value of the land at the time of acquisition.
✓ The location and type of land must be considered when determining compensation.
✓ A flat rate of increase for all lands is not appropriate; the increase must be based on the specific characteristics of the land.
✓ Severance charges should only be awarded when the remaining land is diminished in value.
✓ The principles laid down in General Manager, Oil and Natural Gas Corporation Limited. v. Rameshbhai Jivanbhai Patel and Another must be followed when assessing market value and annual increase over a base rate.
The decision could lead to more detailed and nuanced assessments of land values in future acquisition cases, ensuring fairer compensation for landowners. It also sets a precedent for avoiding flat rates of increase and ensuring that severance charges are awarded only when justified.
Directions
The Supreme Court directed that:
a) In respect of lands under acquisition from villages Naharpur Kasan and Kasan, the market value shall be Rs. 39,54,666/- per acre. Additionally, all statutory benefits would be payable.
b) In respect of lands under acquisition from Villages Bas Kusla, Bas Haria and Dhana, the market value shall be Rs. 29,77,333/- per acre. Additionally, all statutory benefits would be payable.
c) In respect of lands from village Manesar the market value shall be Rs. 59,31,999/- per acre. Additionally, all statutory benefits would be payable.
d) M/s. Kohli Holdings Private Limited shall not be entitled to any severance charges.
e) If any sum in excess of what has been found in this Judgment to be the entitlement of any landowner from any of the villages under acquisition was made over to him, the same shall be returned by the landowner to the State by 30th June, 2019. If the excess sum is returned by 30th June, 2019, no interest on said sum shall be payable by the landowner. However, if the sum is not returned by said date, the said sum shall carry interest @ 9% per annum from 1st July, 2019 till realisation and can be realised in a manner known to law.
Development of Law
The ratio decidendi of the case is that compensation for land acquisition must be based on the market value of the land, taking into account the location, type of land, and the principles laid down in previous judgments. The Supreme Court also clarified that severance charges should only be awarded when the remaining land is diminished in value.
There was no change in the previous position of law, but the Supreme Court clarified the application of existing principles to the specific facts of the case.
Conclusion
In conclusion, the Supreme Court modified the compensation awarded by the High Court, ensuring that the compensation was based on the market value of the land, taking into account the location, type of land, and the principles laid down in previous judgments. The Court also clarified that severance charges should only be awarded when the remaining land is diminished in value. This decision emphasizes the need for a nuanced approach to land acquisition compensation, ensuring fairer compensation for landowners.